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12 March, 08:18

Vaughn Manufacturing expects to purchase $180000 of materials in July and $170000 of materials in August. Three-fourths of all purchases are paid for in the month of purchase, and the other one-fourth are paid for in the month following the month of purchase. How much will August's cash disbursements for materials purchases be?

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  1. 12 March, 10:01
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    The August's cash disbursements for materials purchases would be

    $172,500.00 for Vaughn Manufacturing

    Explanation:

    The cash disbursements in the month of August consist of the three-fourth cost of the August purchases and the one-fourth of the July purchases since the 3/4 of the cost of materials purchased is paid in the same month as purchases and the balance of 1/4 of purchase cost in the succeeding month

    Cash disbursements in August = ($170,000*3/4) + ($180,000*1/4) = $127500 + $45,000=$172,500.00
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