Zinc Corporation is developing its cash budget for this month. Each month, the firm manufactures and sells $15,000 of products, and it pays $10,000 for wages, taxes, cost of goods sold, and other operating expenses. Zinc has nothing in its checking account even though its target cash balance is $8,000. What amount will Zinc show on the "bottom line" of its cash budget for this month? That is, what will be Zinc's cash position?

Question

Karter Bass

Business

14 May, 15:39

Zinc Corporation is developing its cash budget for this month. Each month, the firm manufactures and sells $15,000 of products, and it pays $10,000 for wages, taxes, cost of goods sold, and other operating expenses. Zinc has nothing in its checking account even though its target cash balance is $8,000. What amount will Zinc show on the "bottom line" of its cash budget for this month? That is, what will be Zinc's cash position?

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Answers (1)

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Mireya · Answer 1

shortfall of $3,000

Explanation:

The computation of the amount shown in the bottom of the cash budget is shown below:

= Sale value of products - expenses incurred related to the costs of goods sold, wages, taxes, and the other operating expenses - targeted cash balance

= $15,000 - $10,000 - $8,000

= - $3,000

Since the targeted cash balance is $8,000 but the net income is only $5,000 which results in a shortfall of $3,000