The Carlquist Company makes and sells a product called Product K. Each unit of P
ID: 2544353 • Letter: T
Question
The Carlquist Company makes and sells a product called Product K. Each unit of Product K sells for $24 dollars and has a unit variable cost of $18. The company has budgeted the following data for November: Sales of $1,152,200, all in cash. . A cash balance on November 1 of $48,000. Cash disbursements (other than interest) during November of $1,160,000. A minimum cash balance on November 30 of $60,000. 40200-boop-th If necessary, the company will borrow cash from a bank. The borrowing will be in of $1,000 and will bear interest at 2% per month. All borrowing will take place at the beginning of the month. The November interest will be paid in cash during November The amount of cash needed to be borrowed on November 1 to cove disbursements and to obtain the desired November 30 cash balance is: A. $20,000 B $%21,000 D. $38,000 C. $37,000 no cit soles Cosh balance, bei totol cash available 43,000 less cash olsbuisemert00 200200 er o over olTsbuisem ents terest (27x£4000) 420 81180 betore tnancmg31730 21000 Fmonding enotin 6o780Explanation / Answer
Solution:
Beginning cash balance
48,000
Plus: Cash receipts (all sales are for cash)
1,152,200
Total available cash
1,200,200
Minus: Cash disbursements
1,160,000
Excess of cash
40,200
Interest (2% * 21,000)
420
Cash balance before financing
39,780
Financing
21,000
Ending cash balance
60,780
The company desires the cash balance of 60,780; and available cash balance is 40,200; thus the difference of 20,580 or 21,000 (since cash must be borrowed in multiples of $1,000) must be borrowed
Beginning cash balance
48,000
Plus: Cash receipts (all sales are for cash)
1,152,200
Total available cash
1,200,200
Minus: Cash disbursements
1,160,000
Excess of cash
40,200
Interest (2% * 21,000)
420
Cash balance before financing
39,780
Financing
21,000
Ending cash balance
60,780