Question

Ultravision Inc. anticipates sales of \(290,000 from January through April. Materials will represent 50 percent of sales, and because of level production, material purchases will be equal for each month during the four months of January, February, March, and April.

Materials are paid for one month after the month purchased. Materials purchased

in December of last year were \)25,000 (half of \(50,000 in sales). Labor costs for each of the four months are slightly different due to a provision in the labor contract in which bonuses are paid in February and April. Here are the labor figures:

January	\)15,000
February	18,000
March	15,000
April	20,000

Fixed overhead is $11,000 per month. Prepare a schedule of cash payments for January through April.

Short answer

Schedule of cash payments

Months	Monthly material purchased	Payment to material purchased (A)	Monthly labor cost (B)	Monthly fixed overheads (C )	Total cash payments (A+B+C)
December	$25,000
January	36,250	25,000	15,000	11,000	51,000
February	36,250	36,250	18,000	11,000	65,250
March	36,250	36,250	15,000	11,000	62,250
April	36,250	36,250	20,000	11,000	67,250

Step-by-step solution

Sales per month

$\begin{array}{rcl}\mathrm{Sales}\mathrm{per}\mathrm{month}& =& \frac{\mathrm{Total}\mathrm{sales}\mathrm{of}4\mathrm{months}}{\mathrm{Number}\mathrm{ofmonth}}\\ & =& \frac{\$290,000}{4}\\ & =& \$72,500\end{array}$

Cost of material purchased per month

$\begin{array}{rcl}\mathrm{Monthly}\mathrm{material}\mathrm{purchased}& =& 50\%\mathrm{of}\mathrm{sales}\mathrm{per}\mathrm{month}\\ & =& 50\%\times \$72,500\\ & =& \$36,250\end{array}$