Question

A company plans to purchase inventory for the second half of 2014 as follows: July $100,000...

A company plans to purchase inventory for the second half of 2014 as follows: July $100,000 August $75,000 September $225,000 October $125,000 November $250,000 December $30,000

They usually pay 50% of inventory purchases in the month of purchase, 35% in the following month, and 15% in the second month.

Based on this information, what are the forecasted total 2014 cash payments for inventory purchased in the second half of 2014?

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Answer #1

forecasted total 2014 cash payments for inventory purchased in the second half of 2014

is the payment made in 2014 for inventory purchased in 2014

As per the payment pattern, all amount will be paid in second half itself except 15% of inventory purchased in November and 50% of Inventory purchased in December

Hence, payments = 100,000+75,000+225,000+125,000+250,000*85% + 30,000*50%

= $752,500

Note: Please check the figure for December, Is it 30,000 or 300,000?

The answer has been given on the basis of stated figure of 30,000

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