Fortune Company's direct materials budget shows the following cost of materials to be purchased for the coming three months: January February March $ 3 Material purchases 14,870 11,690 12,760 Payments for purchases are expected to be made 50% in the month of purchase and 50% in the month following purchase. The December Accounts Payable balance is $7,200. The budgeted cash payments for materials in January are

A. $13,580.

B. $13,815

C. $9,980

D. $7,200.

E. $19,960.

Total = $14,635

Explanation:

Giving the following information:

Cost of materials:

January = 14,870

February = 11,690

March = 12,760

Payments for purchases are expected to be made 50% in the month of purchase and 50% in the month following purchase.

The December Accounts Payable balance is $7,200.

To calculate the cash disbursement for January, we need to use the following structure:

Cash collection:

Accounts Payable = 7,200

Cash From January = (14,870*0.5) = 7,435

Total = $14,635