(Appendix 10A)Gold Company Has the Following Balances at December 31

question 70

Multiple Choice

(Appendix 10A) Gold Company has the following balances at December 31, 20x0: Cash $6,000; accounts receivable $34,000 ($10,000 from November and $24,000 from December) ; merchandise inventory $40,000; and accounts payable $20,000 (for merchandise purchases only) . Budgeted sales follow: January $ 50,000
February 90,000
March 60,000
April 100,000
Other data:
*Sales are 40% cash, 50% collected during the following month, and 10% collected during the second month after sale. A 3% cash discount is given on cash sales
*Cost of goods sold is 40% of sales
*Ending inventory must be 140% of the next month's cost of sales
*Purchases are paid 70% in month of purchase and 30% in the following month
*The selling and administrative cost function is: $6,000 + $0.2 × sales. This includes $1,000 for amortization
*All costs are paid in the month incurred
*Minimum cash balance requirement is $6,000
The cash disbursements for purchases in March are:

• A)$46,400
• B)$32,480
• C)$38,240
• D)$48,720

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Definitions:

Average Fixed Cost

Production's fixed expenses (unchanged by the amount of production) split by the quantity of product made.

Average Variable Cost

The cost that varies with the level of output, computed by dividing total variable costs by the quantity of output produced.

Total Cost

A comprehensive total of expenses involved in the creation of goods or services, covering both fixed and variable costs.

Diminishing Marginal Product

The principle that as additional units of a variable input are added to fixed inputs, the increase in output will eventually decrease.