CraftCo, Inc.'s projected sales for the first six months of 2012 are given below:
Jan. $500,000 April $490,000
Feb. $740,000 May $740,000
Mar. $380,000 June $610,000
40% of sales are collected in cash at time of sale, 50% are collected in the month following the sale,
and the remaining 10% are collected in the second month following the sale. Cost of goods sold is
60% of sales. Purchases are made in the month prior to the sales, and payments for purchases are
made in the month of the sale. Total other cash expenses are $40,000/month. The company's cash
balance as of February 28, 2012 will be $25,000. Excess cash will be used to retire short-term
borrowing (if any). CraftCo, Inc. has no short term borrowing as of February 28, 2012. Assume that
the interest rate on short-term borrowing is 1% per month. The company must have a minimum
cash balance of $15,000 at the beginning of each month. What is CraftCo, Inc.'s projected cash
balance at the end of March 2012?
A) $352,000 B) $301,000 C) $329,000 D) $361,000
C
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