Question: California Cement Co produces its products two months in advance
California Cement Co. produces its products two months in advance of anticipated sales and ships to warehouse centers the month before sale. The inventory safety stock is 20% of the anticipated month’s sale. Beginning inventory in September 2009 was 33,913 units. Each unit costs $2.80 to make. The average sales price per unit is $5.75. The cost is made up of 30% labor, 65% materials, and 5% shipping (to warehouse). Labor is paid the month of production, shipping the month after production, and raw materials the month prior to production. What is the production cash outflow for the month of September 2009 production, and in what months does it occur? Note: September production is based on November anticipated sales. Use the fourth-quarter sales forecasts from Problem 6.
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