Choice "D" is correct, $7,750. This problem requires the candidate to derive budgeted cash payments for the month of May from a schedule of budgeted cost of sales. The question indicates that components are purchased one month prior to assembly and two months prior to sale. The question also indicates that components are paid for over two months, with 75% being paid in the month of purchase and the remaining 25% paid in the following month. Therefore, cash payments in May will relate to units to be sold in June and July. The payments will include the 25% balance of components purchased for June sales, and the 75% payment for components purchased for July sales. ($8,000 × 75% + $7,000 × 25%$7,750) The following computation sheet shows the development of the cash budget for May:

Choice "b" is incorrect, per above.Choice "c" is incorrect. Computation for April cash budget is computed if the candidate fails to account for all one-month lags.
Choice "a" is incorrect. Response does not properly compute components of cash payments.