The Arkansas Company makes and sells a product called Product K. Each unit of Product K...
The Arkansas Company makes and sells a product called Product K. Each unit of Product K sells for $42 and has a unit variable cost of $20. The company has the following budgeted data for November:
- Sales of $1,332,200, all in cash.
- A cash balance on November 1 of $67,800.
- Cash disbursements (other than interest) during November of $1,340,000.
- A minimum cash balance on November 30 of $98,000.
If necessary, the company will borrow cash from a bank. The
borrowing will be in multiples 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 cover all
cash disbursements and to obtain the desired November 30 cash
balance is: (Round up your answer to nearest multiple of
$1,000.)
Multiple Choice
-
$38,000.
-
$39,000.
-
$57,000.
-
$58,000.
Homework Answers
Cash Budget
| Beginning balance | 67800 |
| Sales | 1332200 |
| Less: Cash disbursement | -1340000 |
| Preliminary Cash balance | 60000 |
| Borrowing | 39000 |
| Less: Interest expense | -780 |
| Ending Cash balance | 98220 |
So answer is b) $39000
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