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Question
CraftCo, Inc.'s projected sales for the first six months of 2012 are given below:| Jan. | $500,000 | April | $490,000 |
| Feb. | $740,000 | May | $740,000 |
| Mar. | $380,000 | June | $610,000 |
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
Answer
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