94) Buster enterprises projected sales for thr first six months of 2008 are; Jan

Question

94) Buster enterprises projected sales for thr first six months of 2008 are;
Jan $400,000 Feb $540,000, Mar $350,000 Apr $450,0000, May $480,000, june $520,000
30% of sales are collected in the cash at time of sale and th eremaining 10% are collected in the second month following the sale. Cost of goods sold is 70% of sales . Purchases are made in the month prior to the sales and payments for the purchases are made in the month of the sale.
Total other expenses are $50,000 per month, the company's cash balance of February 28th, 2008 will be $30,000. Excess cash will be used to retire short term borrowing (if any). Buster Enterprises has no short term borrowing as of Feb 28th 2008.
Assume that the interest rate on short term borrowing is 1% per month. The company must have a minimum cash balance of $20,000at the beginning of each month, what is busters EBIT for April 2008?

Explanation / Answer

Sales of April =                   $450,000

less (COGS=70% 0f sales) = $315,000

Gross Profit                     = $135,000

less Expenses                  = $50,000

EBIT                               = $85,000

Related Questions

Navigate

• Browse (All)
• Browse 9
• Subjects

---

---

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