Question

Your Company makes and sells a single product. Each unit sells for $32 dollars and has a unit variable cost of $20. The company has budgeted the following data for November: * Sales of 46,000 units, all for cash. * A cash balance on November 1 of $45,000. * Cash disbursements during November of $1,460,000. * Deprecation expense $35,000. * A minimum required cash balance on November 30 of $75,000. How much cash must be borrowed to cover all cash disbursements and to obtain the required November 30 cash balance

Answer 1

Your Company

The cash that must be borrowed to cover all cash disbursements and to obtain the required November 30 cash balance is:

= $18,000.

Step-by-step explanation:

a) Data and Calculations:

Selling price per unit = $32

Variable cost per unit = $20

Contribution margin per unit = $12 ($32 - $20)

Beginning cash balance on November 1 = $45,000

Cash disbursements = $1460,000

Depreciation expense = $35,000

Minimum required cash balance on November 30 = $75,000

Budgeted sales units for November = 46,000

Sales revenue (cash) = $1,472,000 (46,000 * $32)

Variable costs = 920,000 (46,000 * $20)

Contribution margin = $552,000 (46,000 * $12)

Cash Budget

For the month of November

Beginning cash balance $45,000

Total cash collections = 1,472,000

Cash available $1,517,000

Cash disbursements (1,460,000)

Cash balance $57,000

Cash to borrow 18,000 ($75,000 - $57,000)

Minimum cash balance $75,000