Your Company makes and sells a single product. Each unit sells for $32 dollars and has a unit variable cost of $20. The company has budgeted the following data for November: * Sales of 46,000 units, all for cash. * A cash balance on November 1 of $45,000. * Cash disbursements during November of $1,460,000. * Deprecation expense $35,000. * A minimum required cash balance on November 30 of $75,000. How much cash must be borrowed to cover all cash disbursements and to obtain the required November 30 cash balance

Your Company

The cash that must be borrowed to cover all cash disbursements and to obtain the required November 30 cash balance is:

= $18,000.

Explanation:

a) Data and Calculations:

Selling price per unit = $32

Variable cost per unit = $20

Contribution margin per unit = $12 ($32 - $20)

Beginning cash balance on November 1 = $45,000

Cash disbursements = $1460,000

Depreciation expense = $35,000

Minimum required cash balance on November 30 = $75,000

Budgeted sales units for November = 46,000

Sales revenue (cash) = $1,472,000 (46,000 * $32)

Variable costs =                920,000 (46,000 * $20)

Contribution margin =   $552,000 (46,000 * $12)

Cash Budget

For the month of November

Beginning cash balance    $45,000

Total cash collections =   1,472,000

Cash available                $1,517,000

Cash disbursements      (1,460,000)

Cash balance                     $57,000

Cash to borrow                     18,000 ($75,000 - $57,000)

Minimum cash balance     $75,000

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