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Question

Table 1
Dorian Industries' projected sales for the first six months of 2004 are given below:
Jan. $200,000April $400,000
Feb. $240,000May $320,000
March $280,000June $320,000
25% of sales is collected in cash at the time of the sale, 50% is collected in the month following the sale, and the remaining 25% is collected in the second month following the sale. Cost of goods sold is 75% of sales. Purchases are made in the month prior to the sale, and payments for purchases are made in the month of the sale. Total other cash expenses are $60,000/month. The company's cash balance as of February 28, 2004 will be $40,000. Excess cash will be used to retire short-term borrowing (if any). Dorian has no short-term borrowing as of February 28, 2004. Assume that the interest rate on short-term borrowing is 1% per month. The company must have a minimum cash balance of $25,000 at the beginning of each month. Round all answers to the nearest $100.
Based on the information in Table 1, what is Dorian Industries' total disbursement in May (not including interest on short-term borrowing)?
A) $300,000
B) $240,000
C) $25,900
D) ($60,000)

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