Fortune Company's direct materials budget shows the following cost of materials to be purchased for the coming three months: January February March Material purchases $ 12,160 $ 14,270 $ 11,090 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 $6,200. The budgeted cash payments for materials in January are:

$12,280

Explanation:

The question asks for the budgeted cash payments for materials in January.

It also states that payments for purchases are expected to be made 50% in the month of purchase and 50% in the month following purchase.

The means that the amount from December is the balance to be paid in January as the other 50% has already been paid.

We then have to take 50% of the January figure to know how much cash payments are to be paid in January.

= 6,200 + 12,160(0.5)

= 6,200 + 6,080

= $12,280

$12,280 is the budgeted cash payments for materials in January.

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