Problem Set 1

1. Juan's Taco Company has restaurants in five college towns. Juan wants to

expand into Austin and College Station and needs a bank loan to do this. Mr.

Bryan, the banker, will finance construction if Juan can present an acceptable

three-month financial plan for January through March. Following are actual and

forecasted sales figures:

Additional

Actual Forecast Information

November 120,000 January 190,000 April forecast 230,000

December 140,000 February 210,000

March 230,000

Of Juan's sales, 30 percent are for cash and the remaining 70 percent are on

credit. Of credit sales, 40 percent are paid in the month after sale and 60 percent

are paid in the second month after the sale. Materials cost 20 percent of sales

and are paid for in cash. Labor expense is 50 percent of...