24. The Carlquist Company makes and sells a product called Product K. Each unit

Question

24. 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. 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: A. $20,000 B. $21,000 C. $37,000 D. $38,000 Cash Budget $ 48,000 Cash balance, beginning Add cash receipts (all sales are for cash Total cash available Less cash disbursements Excess (deficiency) of cash available over disbursements. Interest (2% x $21,000*) Cash balance before financing Financing Cash balance, ending 1,152,200 1,200,200 .1,160,000 40,200 420 39,780 21,000 60.780 cash available over disbursements is $40,200, and cash must be borrowed in multiples.of $1,000, it would appear that the company must borrow at least $21,000. The remainder Since the company desires an ending cash balance of at least $60,000, the excess of of the computations establish that this borrowing will suffice, including the interest on the borrowing

Explanation / Answer

Suppose you Borrow $ 20,000 then you Ending Cash Balance will be $ 59,780 (i.e $ 39,780 + 20,000) which is less than the desire cash balance an as you mention we can borrow only in the multiple of the $ 1,000 we have to Borrow $ 21,000 to maintain the Desire cash balance at the end it is minimum balance required company may hold some extra cash on above that which come to $ 780 due to compulsion of the Borrowing in multiple of the $ 1000.

Related Questions

Navigate

• Browse (All)
• Browse 2
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.