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Question
Rawhide Outfitters had projected its sales for the first six months of 2012 to be as follows:| Jan. | $50,000 | April | $180,000 |
| Feb. | $60,000 | May | $240,000 |
| Mar. | $100,000 | June | $240,000 |
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). The firm has no short-term borrowing as of March 1st, 2012. Assume that the interest rate on short-term borrowing is 1% per month. What was Rawhides' projected loss for March?
A) $184,000
B) $110,000
C) $84,000
D) none of the above
Answer
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