Question

The controller of Harrington Company estimates sales and production for the first four months of 2016 as follows:

		January		February		March		April
Sales		$30,200		$42,900		$54,800		$27,800
Production in units		1,030		1,550		2,170		2,590

Sales are 40% cash and 60% on account, and 60% of credit sales are collected in the month of the sale. In the month after the sale, 40% of credit sales are collected. It takes 4 kg of direct material to produce a finished unit, and direct materials cost $5 per kg. All direct materials purchases are on account, and are paid as follows: 40% in the month of the purchase, 60% the following month. Ending direct materials inventory for each month is 40% of the next month’s production needs.

January’s beginning materials inventory is 1,648 kg. Suppose that both accounts receivable and accounts payable are zero at the beginning of January.

Answer the following questions:

What are cash payments on account for February?

Answer 1

The answer is as follows: