Sales are made on a cash basis only. Koehl's purchases must be paid for during the following month. Koehl pays herself a salary of $4,200 per month, and the rent is $2,100 per month. In addition, she must make a tax payment of $13,000 in December. The current cash on hand (on December 1) is $900, but Koehl has agreed to maintain an average bank balance of $7,000 - this is her target cash balance. (Disregard the amount in the cash register, which is insignificant because Koehl keeps only a small amount on hand in order to lessen the chances of robbery.)

The estimated sales and purchases for December, January, and February are shown below. Purchases during November amounted to $140,000.

The estimated sales and purchases for December, January, and February are shown below. Purchases during November amounted to $140,000.

Sales Purchases

December $170,000 $25,000

January 40,000 25,000

February 62,000 25,000