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##### MBA-560 Test7: Problems

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Question;Problem 1. Ortiz Manufacturing is considering developing and;marketing one of two new products, A and B. It has accumulated the following;information about the two products;Required;1) Which of these items are relevant to;Ortiz's decision about which of these products it will launch?Problem 2. Mae Lee owns a small retail store in Cairo, Georgia. The;following summary information regarding expectations for the month of January;is provided: As of December 31 there is \$500 in the bank and the balance in;accounts receivable is \$2,500. Budgeted cash and credit sales for January are;\$3,000 and \$2,000, respectively. Ninety percent of credit sales are collected;in the month of sale and the remainder is collected in the following month.;Mae's suppliers do not extend credit. Cash payments for January are expected to;be \$12,000. Mae has a line of credit that enables the store to borrow funds on;demand. However, funds must be borrowed on the first day of the month and;interest paid in cash on the last day of the month. Mae desires to maintain a;\$500 cash balance before consideration is given to the payment of interest.;Mae's bank charges annual interest of 12% per year.Required;1) Compute the amount of funds that needs to be borrowed.2) Compute the;amount of interest expense that will appear on the January 31 pro forma income;statement.

Paper#51360 | Written in 18-Jul-2015

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