Justin's Plant Store, a Retailer, Started Operations on January 1

question 15

Multiple Choice

Justin's Plant Store, a retailer, started operations on January 1. On that date, the only assets were $16,000 in cash and $3,500 in merchandise inventory. For purposes of budget preparation, assume that the company's cost of goods sold is 60% of sales. Expected sales for the first four months appear below: $\begin{array} { |l | r | } \hline & \text { Expected Sales } \\\hline \text { January } & \$ 10,000 \\\hline \text { February } & 24,000 \\\hline \text { March } & 16,000 \\\hline \text { April } & 25,000 \\\hline\end{array}$ The company desires that the merchandise inventory on hand at the end of each month be equal to 50% of the next month's merchandise sales (stated at cost) . All purchases of merchandise inventory must be paid in the month of purchase. Sixty percent of all sales should be for cash; the balance will be on credit. Seventy-five percent of the credit sales should be collected in the month following the month of sale, with the balance collected in the following month. Variable operating expenses should be 10% of sales, and fixed expenses (all depreciation) should be $3,000 per month. Cash payments for the variable operating expenses are made during the month the expenses are incurred.
-In a budget of cash disbursements for March,what would be the total cash disbursements?

• A) $11,200.
• B) $13,900.
• C) $16,900.
• D) $22,300.

---

Definitions:

Labor

The body of work performed by human beings, often in exchange for payment, significant in economics for its role in production.

Materials

Substances or components used in the production of goods or in the performance of services.

Square Yards

A unit of area measurement equal to a square measuring one yard on each side, used in both the U.S. customary and British imperial systems.

Herb Garden

A dedicated garden space for growing herbs, often used for culinary, medicinal, or aromatic purposes.