Problem 2

The following information pertains to Maginoo Co.:

Month Sales Purchases

January 130,000 116,000

February 140,000 120,000

March 150,000 128,000

Cash collected from customers in the following manner:

Month of sale 30%

Month following the sale 70%

40% of purchases are paid for in cash in the month of purchase, and the balance is paid the following month.

Labor costs are 20% of sales. Other operating costs are P115,000 per month (including P14,000 of depreciation). Both of these are paid in the month incurred.

The cash balance on March 1 is P4,000. A minimum cash balance of P3,000 is required at the end of the month. Money can be borrowed in multiples of P1,000.

Determine the following:

1. Total cash collected from customers in March

2. Total cash paid to suppliers in March

3. Total cash that will be disbursed for labor and operating costs in March