The Arkansas Company Makes and Sells a Product Called Product

The Arkansas Company makes and sells a product called Product K. Each unit of Product K sells for $24 and has a unit variable cost of $18. The company has the following budgeted data for November:
∙ Sales of $1,152,200, all in cash.
∙ A cash balance on November 1 of $48,000.
∙ Cash disbursements (other than interest) during November of $1,160,000.
∙ A minimum cash balance on November 30 of $60,000.
If necessary, the company will borrow cash from a bank. The borrowing will be in multiples of $1,000 and will bear interest at 2% per month. All borrowing will take place at the beginning of the month. The November interest will be paid in cash during November.
The amount of cash needed to be borrowed on November 1 to cover all cash disbursements and to obtain the desired November 30 cash balance is:

A) $20,000.
B) $21,000.
C) $37,000.
D) $38,000.

Correct Answer:

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