Question

Marigold Corp.'s direct materials budget shows total cost of direct materials purchases for January $160000, February $200000 and March $260000. Cash payments are 60% in the month of purchase and 40% in the following month. The budgeted cash payments for March are

$224000.

$184000.

$200000.

$236000.

Answer 1

Marigold Corp.'s direct materials budget: cash budget

Events	January ($)	February ($)	March ($)
Purchases of Direct Materials	160000	200000	260000
Cash Payment	January ($)	February ($)	March ($)
60% in the month of purchase	96000	120000	156000
40% in the following month		64000	80000
Total Budgeted Payment	96,000	184,000	236,000

In the month of March . budgeted payment would be

60% of current month purchses + 40% of last month purchases

=60% of $260,000 + 40% of $200,000

= $156,000 + 80,000 = $ 236,000