The Projections of Direct Materials Purchases That Follow Are for the Sombo

question 112

Multiple Choice

The projections of direct materials purchases that follow are for the Sombo Corporation. $\begin{array}{lrr} &\text { Purchases on}&\text { Cash Purchases } \\&\text { Account }\\\text { December } & \$ 40,000 & \$ 30,000 \\\text { January } & 60,000 & 20,000 \\\text { February } & 50,000 & 35,000 \\\text { March } & 70,000 & 25,000\end{array}$
The company pays for 60 percent of purchases on account in the month of purchase and 40 percent in the month following the purchase.What is the expected cash payment for direct materials for the month of February?

• A) $52,000
• B) $72,000
• C) $89,000
• D) $95,000

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Definitions:

Variable Costs

Costs that vary directly with the level of production or volume of output.

Present Value

The current worth of a future sum of money or stream of cash flows, given a specified rate of return.

Interest Rates

The cost of borrowing money, typically expressed as a percentage of the total amount loaned, paid to the lender over a specific period of time.

Capacity Alternatives

Options or strategies an organization can employ to adjust its capacity to meet changing demand.