PROBLEM B

Month Sales Purchases

January 30,000 16,000

February 40,000 20,000

March 50,000 28,000

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 P15,000 per month (including P4,000 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.

a. How much cash will be collected from customers in March?

b. How much cash will be paid to suppliers in March?

c. How much cash will be disbursed for labor and operating costs in March?

d. What is the ending cash balance for March?