Question

Finch Company began its operations on March 31 of the current year. Finch has the following projected costs: May June April $159,700 890 Manufacturing costs (1) Insurance expense (2) Depreciation expense Property tax expense (3) $192,500 890 1,920 $214,400 890 1,920 1,920 440 440 440
(1) Of the manufacturing costs, three-fourths are paid for in the month they are incurred; one fourth is paid in the following month
(2) Insurance expense is $890 a month; however, the insurance is paid four times yearly in the first month of the quarter, (i.e., January, April, July, and October).
(3) Property tax is paid once a year in November The cash payments expected for Finch Company in the month of May are
a. $224 225
b. $144,375
c. $184,300
d. $39,925

Answer 1

Answer:

$184,300

Explanation:

1 There will be no cash payment for insurance expense because it has been already paid.

2 Depreciation is not a cash expense

3 Property tax will be paid in November

4 Only the manufacturing cost is to be paid in May

Manufacturing cost = May(75%) + April(25%)

Manufacturing cost = ($192,500 x 75%) + ($159,700 x 25%)

Manufacturing cost  = $184,300