The Blatz Brewing Company produces 25 million hectolitres of beer each

The Blatz Brewing Company produces 25 million hectolitres of beer each year. To put this in perspective, California consumed that much beer last year. A sales forecast for Blatz is provided in the top row of the table.

Blatz sells its beer at a wholesale price of US$85 per hectoliter. All sales are on account and 75% of receivables are collected after 1 month, while 25% are collected after 2 months. Blatz buys barley, hops and yeast one month before the sale. Raw materials cost 15% of the wholesale price of the beer. Blatz purchases its raw materials on account and pays its suppliers one month after the purchase.
Average monthly overhead expenses are $35M (wages, salaries, heat, water, electricity, selling, general and administration). What are Blatz’ net cash flows in March?

Sales Forecast and Cash Budget
Blatz Brewing Company
January February March April
Sales Forecast – millions of hectoliters 1 1 1.5 2
Sales Forecast – millions of dollars $85 $85 $128 $170
Collections from last month
Collections from 2 months ago
Total Cash Inflows

Purchases from Suppliers
Payments to Suppliers
Overhead Expenses 35 35 35 35
Total Disbursements

Net Cash Flow

A) $11
B) $31
C) $38
D) $64
E) $68

ANSWER

B