Andre's Photo Store, a manufacturing firm, started operations on January 1, 2008. On that date, the only assets were cash of $10,000, and inventory of $2,250 (1,500 direct material kits). They produce only one item, a disposable camera that sells for $10. Variable costs of production are $4, consisting of a direct material kit that costs $1.50, $2 in direct labor, and $0.50 per unit in variable overhead. Other expenses include $2 per camera in variable selling expense, $10,000 per month in fixed production cost, and $6,000 per month in fixed selling and administration.
Sales are collected 60% in the month of sales and 40% in the next month.
All expenses are paid in the month they are incurred except material (kit) purchases which are paid in the month following purchase.
Material inventory is equal to 30% of the next months production requirements.
Cameras are made when ordered so there is no finished goods inventory.
Sales in units are forecasted as follows:
January 5,000
February 6,000
March 7,000
Reference: Ref 10-3
Assume that there are 5,100 kits purchased in February. What would accounts payable be at the end of February?