Dilom Farm Supply Is Located in a Small Town in the Rural

question 134

Multiple Choice

Dilom Farm Supply is located in a small town in the rural west. Data regarding the store's operations follow:
Sales are budgeted at $260,000 for November, $230,000 for December, and $210,000 for January.
Collections are expected to be 55% in the month of sale, 40% in the month following the sale, and 5% uncollectible.
The cost of goods sold is 80% of sales.
The company purchases 50% of its merchandise in the month prior to the month of sale and 50% in the month of sale. Payment for merchandise is made in the month following the purchase.
Other monthly expenses to be paid in cash are $21,700.
Monthly depreciation is $17,000.
Ignore taxes.
-Accounts payable at the end of December would be:

• A) $84,000
• B) $92,000
• C) $184,000
• D) $176,000

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Definitions:

Income Effect

The change in an individual's consumption patterns resulting from a change in their real income.

Labor Supply Curve

A graphical representation showing the relationship between the wage rate and the quantity of labor that workers are willing to supply.

Substitution Effect

The change in consumption patterns due to a change in relative prices, leading consumers to replace more expensive items with cheaper alternatives.

Income Effect

The change in an individual's or economy's income and how that change will affect the quantity demanded of a good or service.