Question: National Beverage Company produces its products two months in advance
National Beverage Company produces its products two months in advance of anticipated sales and ships to warehouse centers the month before sale. The inventory safety stock is 10% of the anticipated month’s sale. Beginning inventory in October 2009 was 267,143 units. Each unit costs $0.25 to make. The average selling price is $0.70 per unit. The cost is made up of 40% labor, 50% materials, and 10% 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 October 2009 production, and in what months does it occur? Note: October production is based on December anticipated sales. Use the fourth-quarter sales forecasts from Problem 5.
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