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Jung Corporation has prepared the following sales budget: Month Sales in units January 8,400 February 8,000...

Jung Corporation has prepared the following sales budget: Month Sales in units January 8,400 February 8,000 March 7,400 April 7,200 Jung purchases only the units projected for sales each month. The average purchase cost of each unit is $70 and 10% of purchases are paid in full in the month of purchase. Jung gets a 2% prompt payment discount on these purchases. The remaining 90% of purchases are paid for in full in the following month. Total selling, general and administrative costs amount to $35,000 each month, of which $3,650 is depreciation. How much cash is disbursed in total in February?

Group of answer choices $591,350 $609,000 $616,550 $615,430

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Answer #1

Solution: $616,550

Working:

Particulars January February
Sales 8400 8000
Purchase price     588,000           560,000
Cash paid @10% for Feb production (560,000 * 10%)              56,000
Cash paid @90% for Jan. production (588,000 * 90%)           529,200
Cash paid for selling, general and administrative costs              31,350
          616,550
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