The Following Details Have Been Extracted from the Budget of a Merchandiser

question 96

Multiple Choice

The following details have been extracted from the budget of a merchandiser. $$\begin{array} { | l | l | } \hline \text { Rent Expense } & \$ 8,000 \text { per month } \\\hline \text { Depreciation Expense } & \$ 3,500 \text { per month } \\\hline \text { Insurance Expense } & \$ 1,250 \text { per month } \\\hline \text { Miscellaneous Expense } & 2 \% \text { of sales, paid as incurred } \\\hline \text { Commissions Expense } & 10 \% \text { of sales } \\\hline \text { Salaries Expense } & \$ 7,000 \text { per month } \\\hline\end{array}$$ $$\begin{array} { | l | c | c | c | } \hline \text { Dec } & \text { Jan } & \text { Feb } & \text { March } \\\hline \text { Sales } \$ 45,000 & \$ 50,000 & \$ 65,000 & \$ 80,000 \\\hline\end{array}$$ Commission and salaries expenses are paid 50% in the month to which they relate and the balance in the next month.
Rent and miscellaneous expenses are paid as and when they occur. Insurance is prepaid at the beginning of the quarter. Calculate cash payments for the selling and administrative expenses for the first quarter of the next year.

• A) $70,400
• B) $50,500
• C) $75,000
• D) $62,750

---

Definitions:

Secondary Reserves

Assets that can be quickly converted into cash without losing value but are not held as cash, used by banks to meet short-term needs.

Government Securities

Financial instruments issued by the government to borrow money from investors, which typically include bonds, bills, and notes.

High-risk Investments

Investments with a greater potential for loss or significant fluctuation in value, often offering the possibility of higher returns.

Reserve Requirement

The reserve requirement is the minimum amount of reserves that banks must hold against deposits, set by monetary authorities to control the money supply.