Question

Speedy Runner makes running shoes and they have gathered the following data for the month of​ October: Data Cash on​ 10/1 Expected Cash Collections Direct Materials Cash Disbursements Direct Labor Cash Disbursements MOH Cash Disbursements Operating Expenses Cash Disbursements Capital Expenditures Cash Disbursements Speedy Runner requires an ending cash balance of at least​ $12,000 and can borrow from a line of credit in​ $1,000 increments. How much will Speedy Runner need to borrow at the end of​ October?

Answer 1

Answer: $9,000

Explanation:

Speedy Runner will need to borrow the amount of cash disbursements that will exceed their cash receipts.

= Opening Cash + Cash Receipts - Cash Disbursements

= Opening Cash + Expected Cash Collections - Direct Labor Cash - Direct Materials Cash Disbursements - Operating Expenses Cash Disbursements - MOH Cash Disbursements - Capital Expenditures Cash Disbursements ​- Ending cash balance requirement

= 15,300 + 435,000 - 32,000 - 80,000 - 110,000 - 25,000 - 200,000 - 12,000

= $8,700

They can borrow in incremental terms of $1,000 so to cover the cash requirements they should borrow $9,000.