Esquire Products Inc. expects the following monthly sales: January ps 28,000 July $ 22,000 February 19,000 August
Question:
Esquire Products Inc. expects the following monthly sales: |
January | ps | 28,000 | July | $ 22,000 | |
February | 19,000 | August | 26,000 | ||
March | 12,000 | September | 29,000 | ||
April | 14,000 | October | 34,000 | ||
Can | 8,000 | November | 42,000 | ||
June | 6,000 | December | 24,000 | ||
Total Sales = $264,000 | |||||
Cash sales are 40 percent in a given month, with the rest going to accounts receivable. All accounts receivable are collected in the month following the sale. Esquire sells all its assets at $2 each and produces them at $1 each. Esquire uses leveled production, and the average monthly production is equal to the annual production divided by 12. |
a. | Generate a monthly production and inventory schedule in units. The initial inventory in January is 12,000 units. |
Esquire Products Inc. | |||||||
Production schedule and inventory in units | |||||||
Start Inventory | + | Production | – | Sales | = | Finalizing Inventory | |
January | 12,000 | ||||||
February | |||||||
March | |||||||
April | |||||||
Can | |||||||
June | |||||||
July | |||||||
August | |||||||
September | |||||||
October | |||||||
November | |||||||
December | |||||||
b. | Prepare a calendar of cash receipts from January to December. Suppose dollar sales in the previous December were $20,000. |
Esquire Products Inc. | |||||||||||
Cash Receipt Schedule | |||||||||||
January | February | March | April | Can | June | ||||||
Sales | ps | ps | ps | ps | ps | ps | |||||
Cash receipts: | |||||||||||
Cash sales | ps | ps | ps | ps | ps | ps | |||||
Previous month's credit sales | |||||||||||
Total cash inflows | ps | ps | ps | ps | ps | ps | |||||
Esquire Products Inc. | |||||||||||
Cash Receipt Schedule | |||||||||||
July | August | September | October | November | December | ||||||
Sales | ps | ps | ps | ps | ps | ps | |||||
Cash receipts: | |||||||||||
Cash sales | ps | ps | ps | ps | ps | ps | |||||
Previous month's credit sales | |||||||||||
Total cash inflows | ps | ps | ps | ps | ps | ps | |||||
C. | Prepare a cash payment schedule from January to December. Production costs ($1 per unit produced) are paid in the month they occur. Other cash payments (in addition to production costs) are $7400 per month. |
Esquire Products Inc. | |||||||||||
Cash payment schedule | |||||||||||
Constant production | |||||||||||
January | February | March | April | Can | June | ||||||
Cost of production | ps | ps | ps | ps | ps | ps | |||||
Other cash payments | |||||||||||
Total cash payments | ps | ps | ps | ps | ps | ps | |||||
Esquire Products Inc. | |||||||||||
Cash payment schedule | |||||||||||
Constant production | |||||||||||
July | August | September | October | November | December | ||||||
Cost of production | ps | ps | ps | ps | ps | ps | |||||
Other cash payments | |||||||||||
Total cash payments | ps | ps | ps | ps | ps | ps | |||||
d. | Build a cash budget for January through December using the Part B cash receipt calendar and Part C cash payment schedule. The starting cash balance is $3,000, which is also the desired minimum. (Don't leave cells blank; be sure to enter "0" where needed. Negative amounts should be indicated with a minus sign). |
Esquire Products Inc. | |||||||||||
Cash budget | |||||||||||
January | February | March | April | Can | June | ||||||
Initial cash | ps | ps | ps | ps | ps | ps | |||||
Net cash flow | |||||||||||
Accumulated cash balance | ps | ps | ps | ps | ps | ps | |||||
Monthly loan or (repayment) | |||||||||||
Ending cash balance | ps | ps | ps | ps | ps | ps | |||||
Accumulated loan balance | ps | ps | ps | ps | ps | ps | |||||
Esquire Products Inc. | |||||||||||
Cash budget | |||||||||||
July | August | September | October | November | December | ||||||
Initial cash | ps | ps | ps | ps | ps | ps | |||||
Net cash flow | |||||||||||
Accumulated cash balance | ps | ps | ps | ps | ps | ps | |||||
Monthly loan or (repayment) | |||||||||||
Ending cash balance | ps | ps | ps | ps | ps | ps | |||||
Accumulated loan balance | ps | ps | ps | ps | ps | ps | |||||
e. | Determine the total current assets for each month. Include cash, accounts receivable, and inventory. Accounts receivable for a given month equal 60 percent of that month's sales. Inventory equals ending inventory (part to) multiplied by the cost of $1 per unit. |
Esquire Products Inc. | |||||||
Assets | |||||||
Money | Accounts receivable | Inventory | Total current assets | ||||
January | ps | ps | ps | ps | |||
February | |||||||
March |
Foundations of Financial Management
ISBN: 978-1259194078
15th edition
Authors: Stanley Block, Geoffrey Hirt, Bartley Danielsen