Question

Sentinel Corporation is preparing its cash payments budget for next month. The following information pertains to the cash​ payments:

a.

Sentinel Corporation pays for 45 % of its direct materials purchases in the month of purchase and the remainder the following month. Last​ month's direct material purchases were $78,000​, while the company anticipates $86,000 of direct material purchases next month.

b.

Direct labor for the upcoming month is budgeted to be $35,000 and will be paid at the end of the upcoming month.

c.

Manufacturing overhead is estimated to be 140% of direct labor cost each month and is paid in the month in which it is incurred. This monthly estimate includes

$13,000 of depreciation on the plant and equipment.

d.

Monthly operating expenses for next month are expected to be $42,000​, which includes $2,900 of depreciation on office equipment and $1,900 of bad debt expense. These monthly operating expenses are paid during the month in which they are incurred.

e.

Sentinel Corporation will be making an estimated tax payment of $7,300 next month.

Sentinel Corporation
Cash Payments Budget
Cash payments for direct materials:
55% of last month's purchases:
45% of next month's purchases:
Cash payments for direct labor:
Cash payments for manufacturing overhead:
Cash payments for operating expenses:
Cash payment for taxes:
Total cash payments:

Answer 1

Sentinel Corporation
Cash Payments Budget
Cash payments for direct materials:
55% of last month's purchases:	42900	=78000*55%
45% of next month's purchases:	38700	=86000*45%
Cash payments for direct labor	35000
Cash payments for manufacturing overhead	36000	=(35000*140%)-13000
Cash payments for operating expenses	37200	=42000-2900-1900
Cash payment for taxes	7300
Total cash payments	197100
Note: Depreciation and bad debt expense are non-cash expenses