Reference no: EM132083125

Question - Potato State Manufacturing is preparing its cash payments budget in the upcoming month. The following information pertains to the cash payments:

a. Potato State Manufacturing pays for 70% of its direct materials purchases in the month of purchase and the remainder the following month. Last month's direct material purchases were $40,000, while First State Manufacturing anticipates $45,000 of direct material purchases this coming month.

b. Direct labor for the upcoming month is budgeted to be $25,000 and will be paid at the end of the upcoming month.

c. Overhead is estimated to be 150% of direct labor cost each month and is paid in the month in which it is incurred. This monthly estimate includes $8,000 of depreciation on the plant and equipment.

d. Monthly operating expenses for next month are expected to be $27,500, which includes $1,500 of depreciation on office equipment and $2,000 of bad debt expense. These monthly operating expenses are paid during the month in which they are incurred.

e. Potato State Manufacturing will be making an estimated tax payment of $6,000 next month.

Required: Prepare a cash payments budget for the month.