LPD Logistics, Inc.'s projected sales for the first six months of 2010 are given below
Jan. $300,000 April $350,000
Feb. $350,000 May $500,000
Mar. $475,000 June $400,000
20% of sales are collected in the month of the sale, 75% are collected in the month following the
sale, and 5% are written off as uncollectible. Cost of goods sold is 80% of sales. Purchases are made
the month prior to the sales and are paid during the month the purchases are made (i.e. goods sold
in March are bought and paid for in February). Total other cash expenses are $35,000/month. The
company's cash balance as of February 1, 2010 will be $30,000. Excess cash will be used to retire
short-term borrowing (if any). LPD has no short term borrowing as of February 28, 2010. Assume
that the interest rate on short-term borrowing is 1% per month. The company must have a
minimum cash balance of $20,000 at the beginning of each month. What is LPD's projected gross
profit for April?
A) $70,000 B) $110,550 C) ($50,000 ) D) $100,000
A
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