CraftCo,Inc

question 96

Multiple Choice

CraftCo,Inc.' 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.' projected cash balance at the end of March 2012?

• A)$301,000
• B)$329,000
• C)$352,000
• D)$361,000

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Definitions:

Conversion Costs

Costs incurred to convert raw materials into finished goods, including direct labor and manufacturing overhead.

Prime Costs

The combination of direct materials and direct labor costs that are directly attributable to the production of goods.

Nonmanufacturing Cost

Expenses not directly involved in the production of goods, such as selling, administration, and other overhead costs.

Factory Overhead

All indirect costs associated with manufacturing, such as salaries of supervisors, maintenance, and utilities, not directly tied to the production of goods.