QUESTION 2 Clay Corporation has projected sales and production in units for the

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QUESTION 2 Clay Corporation has projected sales and production in units for the second quarter of the coming year as follows: April $50,000 64,000 May $50,000 47,000 June $60,000 53,000 Sales (in dollars) Production (in units) Cash-related production costs are budgeted at $7 per unit produced. Of these production costs, 39% are paid in the month in which they are incurred and the balance in the following month. Selling and administrative expenses are paid in full in the month incurred and will amount to $97,000 per month. The accounts payable balance on March 31 totals $190,000, which will be paid in April. All units are sold on account for $14 each. Cash collections from sales are budgeted at 60% in the month of sale, 30% in the month following the month of sale, and the remaining 10% in the second month following the month of sale. Accounts receivable on April 1 totaled $500,000 ($90,000 from February's sales and $410,000 from March's sales) What were cash disbursements in May? Enter your answer as an integer, ignore the dollar sign.

Explanation / Answer

EXPECTED CASH PAYMENTS RELATED TO PRODUCTION COST APRIL MAY JUNE Quarter Beginning Accounts payable 190,000 190,000 April Month Production (64000 units @7) 174720 273280 448,000 May month production cost (47000 units @7) 128310 200690 329,000 June Month Production cost (53000 units @7) 144690 144,690 Total Cash disbursement 364,720 401,590 345,380 111,690 Cash disbursement in the Month of May is as follows: Expected disbursals related to Production cost 401590 Add: Selling expense per month 97000 Total Expected cash disbursals in May 498590

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