Esquire Products, Inc., expects the following monthly sales:
|
January
|
524.000
|
May
|
$ 4.00O
|
September
|
25 030
|
|
|
feburary
|
|
|
15.000
|
June
|
2,000
|
October
|
30,000
|
|
|
Starch
|
8.000
|
July
|
18.000
|
November.
|
38 000
|
|
|
April
|
10.000
|
August
|
22,000
|
December.
|
20.000
|
|
|
|
|
TOW soles =
|
$218.003
|
|
|
|
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. ( Note: To do part a, you should work in terms of units of production and units of sales.)
b. Determine a cash receipts schedule for January through December. Assume that dollar sales in the prior December were $20,000. Work part b using dollars.
c. Determine 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.
e. Determine total current assets for each month. Include cash, accounts receivable, and inventory. Accounts receivable equal sales minus 40 percent of sales for a given month. Inventory is equal to ending inventory (part a ) times the cost of $1 per unit.