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Lane Products manufactures a popular kitchen utensil. The company recently expanded, and the controller belleves that it will need to borrow cash to continue operations.

Lane Products manufactures a popular kitchen utensil. The company recently expanded, and the controller belleves that it will need to borrow cash to continue operations. It opened negotiations with the local bank for a one-month loan of $64,000 starting March 1. The bank would charge interest at the rate of 0.5 percent per month and require the company to repay interest and principal on March 31. In considering the loan, the bank requested a projected income statement and cash budget for March.
The following information is avallable:
The company budgeted sales at 24,000 units per month in February, April, and May and at 21,000 units in March. The selling price is $72 per unit.
The company offers a 2 percent discount for cash sales. The company's experience is that bad debts average 1 percent of credit sales.
The inventory of finished goods on February 1 was 3,600 units. The desired finished goods inventory at the end of each month equals 25 percent of sales anticipated for the following month. There is no work in process.
The inventory of raw materlals on February 1 was 2,880 pounds. At the end of each month, the raw materlals inventory equals no less than 20 percent of production requirements for the following month. The company purchases materials in quantities of 310 pounds per shipment.
Selling expenses are 6 percent of gross sales. Administrative expenses, which include depreciation of $1,350 per month on office furniture and fixtures, total $75,600 per month.
The manufacturing budget for the utensil, based on normal production of 23,000 units per month, follows.
\table[[Materials (% pound per utensil, 11,500 pounds, $30 per pound),$345,000
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