Peach Company Has the Following Information: Purchases Are Paid

question 21

Multiple Choice

Peach Company has the following information: Purchases are paid as follows:
75% in the month of purchase
25% one month after purchase
What is the estimated cash disbursement for purchases in March?

• A)$22,500
• B)$24,750
• C)$29,500
• D)$39,000

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Definitions:

Variable Cost Method

A cost-plus method of pricing setting in which only the variable costs are included in the cost amount to which the markup is added.

Fixed Manufacturing Costs

Expenses that do not change with the level of production, such as rent, salaries of permanent employees, and depreciation of factory equipment.

Markup

The extra charge added to the purchasing cost of items to encompass both overhead expenses and profit, setting the sale price.

Contribution Margin

The excess of sales over variable costs; the excess of manufacturing margin over variable selling and administrative expenses.