Esquire Products Inc. expects the following monthly
sales:
January | $ | 31,000 | July | $ | 25,000 |
February | 22,000 | August | 29,000 | ||
March | 15,000 | September | 32,000 | ||
April | 17,000 | October | 37,000 | ||
May | 11,000 | November | 45,000 | ||
June | 9,000 | December | 27,000 | ||
Total sales = $300,000 | |||||
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 15,000 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 $7,700 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.
Monthly Production =150000/12= | 12,500 | |||||||
A | B | C | D=C/2 | E=A+B-D | ||||
Beginning Inventory(Units) | Production (Units) | Sales(Dollar) | Sales (Units) | Ending Inventory | ||||
January | 15000 | 12,500 | $31,000 | 15,500 | 12,000 | |||
February | 12,000 | 12,500 | $22,000 | 11,000 | 13,500 | |||
March | 13,500 | 12,500 | $15,000 | 7,500 | 18,500 | |||
April | 18,500 | 12,500 | $17,000 | 8,500 | 22,500 | |||
May | 22,500 | 12,500 | $11,000 | 5,500 | 29,500 | |||
June | 29,500 | 12,500 | $9,000 | 4,500 | 37,500 | |||
July | 37,500 | 12,500 | $25,000 | 12,500 | 37,500 | |||
August | 37,500 | 12,500 | $29,000 | 14,500 | 35,500 | |||
September | 35,500 | 12,500 | $32,000 | 16,000 | 32,000 | |||
October | 32,000 | 12,500 | $37,000 | 18,500 | 26,000 | |||
November | 26,000 | 12,500 | $45,000 | 22,500 | 16,000 | |||
December | 16,000 | 12,500 | $27,000 | 13,500 | 15,000 | |||
TOTAL | 150,000 | $300,000 | 150,000 | |||||
Accounts Receivable End of December | $12,000 | (20000*60%) | ||||||
A | B=A*40% | C | D=B+C | |||||
CASH RECEIPT SCHEDULE | Sales(Dollar) | Receipts from Cash Sales | Receipts from Accounts Receivable | Total Cash Receipts | ||||
January | $31,000 | $12,400 | $12,000 | $24,400 | ||||
February | $22,000 | $8,800 | $18,600 | $27,400 | ||||
March | $15,000 | $6,000 | $13,200 | $19,200 | ||||
April | $17,000 | $6,800 | $9,000 | $15,800 | ||||
May | $11,000 | $4,400 | $10,200 | $14,600 | ||||
June | $9,000 | $3,600 | $6,600 | $10,200 | ||||
July | $25,000 | $10,000 | $5,400 | $15,400 | ||||
August | $29,000 | $11,600 | $15,000 | $26,600 | ||||
September | $32,000 | $12,800 | $17,400 | $30,200 | ||||
October | $37,000 | $14,800 | $19,200 | $34,000 | ||||
November | $45,000 | $18,000 | $22,200 | $40,200 | ||||
December | $27,000 | $10,800 | $27,000 | $37,800 | ||||
CASH PAYMENT SCHEDULE | A=12500*$1 | B | C=A+B | |||||
Payment for Production | Other Cash Payments | Total Payments | ||||||
January | $12,500 | $7,700 | $20,200 | |||||
February | $12,500 | $7,700 | $20,200 | |||||
March | $12,500 | $7,700 | $20,200 | |||||
April | $12,500 | $7,700 | $20,200 | |||||
May | $12,500 | $7,700 | $20,200 | |||||
June | $12,500 | $7,700 | $20,200 | |||||
July | $12,500 | $7,700 | $20,200 | |||||
August | $12,500 | $7,700 | $20,200 | |||||
September | $12,500 | $7,700 | $20,200 | |||||
October | $12,500 | $7,700 | $20,200 | |||||
November | $12,500 | $7,700 | $20,200 | |||||
December | $12,500 | $7,700 | $20,200 | |||||
CASH BUDGET | A | B | C=A+B | D | E=C-D | |||
Beginning Balance | Cash Receipt | Total Cash Available | Cash Payment | Ending Balance | ||||
January | $3,000 | $24,400 | $27,400 | $20,200 | $7,200 | |||
February | $7,200 | $27,400 | $34,600 | $20,200 | $14,400 | |||
March | $14,400 | $19,200 | $33,600 | $20,200 | $13,400 | |||
April | $13,400 | $15,800 | $29,200 | $20,200 | $9,000 | |||
May | $9,000 | $14,600 | $23,600 | $20,200 | $3,400 | |||
June | $3,400 | $10,200 | $13,600 | $20,200 | ($6,600) | |||
July | ($6,600) | $15,400 | $8,800 | $20,200 | ($11,400) | |||
August | ($11,400) | $26,600 | $15,200 | $20,200 | ($5,000) | |||
September | ($5,000) | $30,200 | $25,200 | $20,200 | $5,000 | |||
October | $5,000 | $34,000 | $39,000 | $20,200 | $18,800 | |||
November | $18,800 | $40,200 | $59,000 | $20,200 | $38,800 | |||
December | $38,800 | $37,800 | $76,600 | $20,200 | $56,400 | |||
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