Question

makes and sells tasty burritos for $8 per unit with a unit variable cost of $6. All sales are for cash and the variable costs are paid immediately. The company has budgeted the following data for March: Sales 22160 units Cash, beginning balance $34000 Selling and administrative (of which depreciation, $5,000) $53000 Required minimum cash balance $66480 If necessary, the company will borrow cash from a bank on the first day of March. Assume that the borrowing can be made in any (exact) amount, but bears interest at 3% per month. The March interest will be paid during subsequent months. Q: What is the closest amount of cash that must be borrowed on March 1 to cover all cash disbursements and to obtain the desired March 31 cash balance

Answer 1

$36,160

Explanation:

expected cash flow for March

Beginning cash balance $34,000

Sales $177,280

Variable costs -$132,960

S&A costs -$48,000

without depreciation

ending cash balance $30,320

desired ending cash -$66,480

cash deficit to be $36,160

covered by bank loan