Rawhide Outfitters Had Projected Its Sales for the First Six

question 29

Multiple Choice

Rawhide Outfitters had projected its sales for the first six months of 2012 to be as follows:

Cost of goods sold is 60% of sales.Purchases are made and paid for two months prior to the sale.40% of sales are collected in the month of the sale,40% are collected in the month following the sale,and the remaining 20% in the second month following the sale.Total other cash expenses are $40,000/month.The company's cash balance as of March 1st,2012 is projected to be $40,000,and the company wants to maintain a minimum cash balance of $15,000.Excess cash will be used to retire short-term borrowing (if any exists) .Fielding has no short-term borrowing as of March 1st,2012.Assume that the interest rate on short-term borrowing is 1% per month.How much short term financing is needed by March 30,2012?

• A) $110,000
• B) $15,000
• C) $70,000
• D) $85,000

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Definitions:

Without Reserve

An auction term indicating that the item for sale will be sold to the highest bidder, irrespective of the bid amount.

Highest Bidder

In an auction, the person who offers the highest amount of money or value for the item or property being sold.

Sales Contract

An agreement between a buyer and seller outlining the terms of a sale, including price, delivery, and product specifications.

UCC

The Uniform Commercial Code, a comprehensive set of laws governing all commercial transactions in the United States.