Dorian Industries' Projected Sales for the First Six Months of 2010

Dorian Industries' projected sales for the first six months of 2010 are given below:
20% of sales are collected in cash at time of sale,50% are collected in the month following the sale,and the remaining 30% are collected in the second month following the sale.Cost of goods sold is 85% of sales.Purchases are made in the month prior to the sales,and payments for purchases are made in the month of the sale.Total other cash expenses are $70,000/month.The company's cash balance as of February 28,2010 will be $10,000.Excess cash will be used to retire short-term borrowing (if any) .Dorian has no short term borrowing as of February 28,2010.Ignore any interest on short-term borrowing.The company must have a minimum cash balance of $40,000 at the beginning of each month.Dorian's projected EBIT for March 2010?

A) $42,000
B) $23,000
C) ($28,000)
D) ($60,000)

Correct Answer:

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