Bailey Company purchases all direct materials on credit.The company expects to pay 60 percent of purchases in the quarter of purchase and 40 percent the following quarter.Accounts payable at the end of last year totaled $1,000,000,all of which will be paid in the first quarter of this coming year.Bailey's direct materials purchases budget shows the following projected cost of materials to be purchased:
Prepare a cash payments budget for purchases of materials for each of the four quarters.
Definitions:
Sales Revenue
The gross revenue is the entirety of income that comes from selling products or services, prior to deducting any costs.
Total Invested Capital
The sum of a company's equity and debt capital, representing the total amount of capital invested in the business.
Profit Margin
A financial performance ratio that shows the percentage of profit a company makes for each dollar of sales.
Gross Margin
The difference between sales revenue and the cost of goods sold, expressed as a percentage of sales revenue.
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