Question: Esquire Products Inc. expects the following monthly sales:
|
|
|
|
|
|
| January |
$ |
24,000 |
July |
$ |
18,000 |
| February |
|
15,000 |
August |
|
22,000 |
| March |
|
8,000 |
September |
|
25,000 |
| April |
|
10,000 |
October |
|
30,000 |
| May |
|
4,000 |
November |
|
38,000 |
| June |
|
2,000 |
December |
|
20,000 |
| Total sales = $216,000 |
|
Cash sales are 40 percent in a given month, with the remainder going into accounts receivable. All receivables are collected in the month following the sale. Esquire sells all of its goods for $2 each and produces them for $1 each. Esquire uses level production, and average monthly production is equal to annual production divided by 12.
a. Generate a monthly production and inventory schedule in units. Beginning inventory in January is 8,000 units.
b. Prepare a cash receipts schedule for January through December. Assume that dollar sales in the prior December were $20,000
c. Prepare a cash payments schedule for January through December. The production costs ($1 per unit produced) are paid for in the month in which they occur. Other cash payments (besides those for production costs) are $7,000 per month.
d. Construct a cash budget for January through December using the cash receipts schedule from part b and the cash payments schedule from part c. The beginning cash balance is $3,000, which is also the minimum desired. (Negative amounts should be indicated by a minus sign.)
e. Determine total current assets for each month. Include cash, accounts receivable, and inventory. The accounts receivable for a given month is equal to 60 percent of that month's sales. Inventory is equal to ending inventory (part a) times the cost of $1 per unit.