1. Consider the level production plan for Pennington Cabinets shown in Table 13.5. Perform a cash flow analy- sis for this production plan, using the cash flow analysis in Example 13.8 as a guide. Assume that each cabinet set sold generates a cash inflow of $2800, while each unit produced using regular time generates a cash outflow of Each unit sells for $500. Regular production and over- time production costs are $350 and $450 per unit, respec- tively. The cost to hold a unit in inventory for one month is $10.
a. Develop a cash flow analysis for this problem. Be sure to calculate net cash flow and cumulative net cash flow for each month.
b. Why do the net cash flows for April and May look so much better than those for the other months? What are the implications for building up and draining down inventories under a level production plan?