Purchases: Jan $10,000, Feb $20,000, Mar $25,000, Apr $22,000, May $27,000, Jun $30,000. Payment pattern: 40 % month of purchase, 35 % next, 25 % second. What are budgeted cash disbursements for May?

Rationale

$25,050 are the budgeted cash disbursements for May.

To determine the budgeted cash disbursements for May, we must consider the payment pattern applied to the purchases made in May and the preceding months. The calculations incorporate the specified percentages for the current month, the previous month, and the month before that.

A ($18,500) YOUR ANSWER

This amount incorrectly represents a calculation that does not account for the proper distribution of payments across the months. It likely underestimates the contributions from prior purchases in April and March, failing to allocate the correct percentages.

B ($24,750) YOUR ANSWER

While this figure may seem plausible, it falls short as it does not fully incorporate the 25% payment expected from March's purchases. It may reflect only partial contributions from April and May, leading to an insufficient total disbursement.

C ($25,050) CORRECT

This amount correctly reflects the budgeted cash disbursements for May. It includes 40% of May's purchases ($10,800 from $27,000), 35% of April's purchases ($7,700 from $22,000), and 25% of March's purchases ($6,250 from $25,000), totaling $25,050.

D ($27,300) YOUR ANSWER

This response overestimates the disbursements by incorrectly assuming that all purchases from May are fully disbursed in that month. It disregards the payment structure that distributes costs over the months following a purchase.

Conclusion

The calculation of budgeted cash disbursements for May must consider the specified payment pattern across the relevant months. By correctly applying the percentages to the purchases from May, April, and March, we arrive at $25,050 as the accurate total. This analysis highlights the importance of understanding cash flow patterns in budgeting scenarios.

Purchases: Jan $10,000, Feb $20,000, Mar $25,000, Apr $22,000, May $27,000, Jun $30,000. Payment pattern: 40 % month of purchase, 35 % next, 25 % second. What are budgeted cash disbursements for May?

$25,050 are the budgeted cash disbursements for May.

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