CraftCo,Inc

question 89

Multiple Choice

CraftCo,Inc.'s projected sales for the first six months of 2012 are given below:

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 earnings before interest and taxes for April 2012?

• A) $156,000
• B) $142,000
• C) $133,000
• D) $ 93,000

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