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In: Accounting

 National Beverage Company produces its products two months in advance of anticipated sales and ships to...

 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 12 % of the anticipated​ month's sale. Beginning inventory in October 2014 was 269,252 units. Each unit costs ​$0.29 to make. The average selling price is $ 0.71 per unit. The cost is made up of 43 % ​labor, 49 % ​materials, and 8 % shipping​ (to the​ warehouse). The company pays for labor the month of​ production, shipping the month after​ production, and raw materials the month prior to production. What is the production cash outflow for products produced in the month of October​ 2014, and in what months does it​ occur?  ​Note:  October production is based on December anticipated sales. The​ fourth-quarter sales forecasts are as​ follows :$1,803,000 ​(October), ​$2,099,000 ​(November), and ​$2,173,000 ​(December).

What is the production cash outflow for the month of October 2014​ production? (​Hint:The production cost comprises​ labor, raw​ materials, and​ shipping.)

The labor cost is : ​$

The raw materials cost is: $

The shipping cost is :$

Solutions

Expert Solution

October's production is based on December's sales

  • Anticipated December sales(units)=Total sales/ price per unit

=$2,173,000/$0.71

=3,060,563 units

  • Safety stock = 3,060,563*12%

                                 =367,268 units

  • Desired Ending Inventory = sales+safety stock

                                                    =3,060,563+367,268

                                                   =3,427,831

  • Required production for OCtober= Desired Ending Inventory-Beginning inventory available                                     =269,252-3,427,831

                                                               =3,158,579

What is the production cash outflow for the month of October 2014​ production? (​Hint:The production cost comprises​ labor, raw​ materials, and​ shipping.)

The labor cost is :$393,875 ​[3,158,579*$0.29*43%]

The raw materials cost is: $448,834[3,158,579*$0.29*49%]

The shipping cost is :$73,279[3,158,579*$0.29*8%]

[rounded off to nearest whole dollar]

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ekkarill92 answered 2 years ago
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