Maris Brothers, Inc., needs a cash disbursement schedule for the months of April, May, and June. Use the format of your notes and the following information in its preparation.

Question

• Sales: February $500,000; March $500,000; April $560,000; May $610,000; June $650,000; July $650,000
• Purchases: Purchases are calculated as 60% of the next month’s sales, 10% of purchases are made in cash, 50% of purchases are paid for 1 month after purchase, and the remaining 40% of purchases are paid for 2 months after purchase.
• Rent: The firm pays rent of $8,000 per month.
• Wages and salaries: Base wage and salary costs are fixed at $6,000 per month plus a variable cost of 7% of the current month’s sales.
• Taxes: A tax payment of $54,500 is due in June.
• Fixed asset outlays: New equipment costing $75,000 will be bought and paid for in April.
• Interest payments: An interest payment of $30,000 is due in June.
• Cash dividends: Dividends of $12,500 will be paid in April.
• Principal repayments and retirements: No principal repayments or retirements are due during these months.

Answer 1

To prepare the cash disbursement schedule for Maris Brothers, Inc. for the months of April, May, and June, we will break down the cash disbursements for each category as provided in the information. Here’s how we can organize this information:

Cash Disbursement Schedule for April, May, and June

| Item | April | May | June | |-------------------------------|-------------|-------------|--------------| | Purchases | | | | | Purchases (60% of May Sales) | $366,000 | $366,000 | | | Cash Purchases (10% of Purchases) | $36,600 | $36,600 | | | 1-Month Delay Payments (50%) | $0 | $183,000 | $183,000 | | 2-Month Delay Payments (40%) | $0 | $0 | $73,200 | | Total Purchases | $402,600| $219,600| $256,200 | | | | | | | Fixed Costs | | | | | Rent | $8,000 | $8,000 | $8,000 | | Wages & Salaries | $42,000 | $43,700 | $44,500 | | Total Fixed Costs | $50,000 | $51,700 | $52,500 | | | | | | | Taxes | | | $54,500 | | Fixed Asset Outlays | $75,000 | $0 | $0 | | Interest Payments | $0 | $0 | $30,000 | | Dividends | $12,500 | $0 | $0 | | Total Disbursements | $540,100| $271,300| $393,200 |

Calculation Breakdown

1. Purchases:

   • April Purchases: \( 60% \times May Sales = 0.6 \times 610,000 = 366,000 \)
   • May Purchases: \( 60% \times June Sales = 0.6 \times 650,000 = 390,000 \)
   • June Purchases: \( 60% \times July Sales = 0.6 \times 650,000 = 390,000 \)
   • Cash Purchases (10%): \( 10% \times \text{Purchases} \)
   • Payments for past purchases (50% for the past month, 40% for the month before that).

2. Fixed Costs:

   • Wages & Salaries: \( Fixed: 6,000 + 7% \text{ of Sales} \)
     • April Wages: \( 6000 + (0.07 \times 560,000) = 6000 + 39,200 = 45,200 \)
     • May Wages: \( 6000 + (0.07 \times 610,000) = 6000 + 42,700 = 48,700 \)
     • June Wages: \( 6000 + (0.07 \times 650,000) = 6000 + 45,500 = 51,500 \)

3. Other Costs:

   • Rent: Constant at $8,000 per month.
   • Taxes due in June: $54,500.
   • Fixed asset purchase in April: $75,000.
   • Interest Payment in June: $30,000.
   • Dividends paid in April: $12,500.

Summary of Disbursements

The total disbursements for each month are calculated by summing all the individual items for each month. The totals are:

• April: $540,100
• May: $271,300
• June: $393,200

This schedule provides a clear overview of expected cash disbursements for Maris Brothers, Inc. for the upcoming three months.