Question

Esquire Products Inc. expects the following monthly sales: January $ 45,000 July $ 39,000 February 36,000 August 43,000 March 29,000 September 46,000 April 31,000 October 51,000 May 25,000 November 59,000 June 23,000 December 41,000 Total sales = $468,000 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 29,000 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 $9,100 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.

Answer 1

Total sales=$468000/$2 per unit= 234000 units

Total production= 234000 units

Monthly production= Annual production/12= 234000/12=19500 units

Inventory schedule

	Opening(a)	Production(b)	sold(c)	closing(a+b-c)
Jan	29000	19500	22500	26000
Feb	26000	19500	18000	27500
March	27500	19500	14500	32500
Apr	32500	19500	15500	36500
May	36500	19500	12500	43500
Jun	43500	19500	11500	51500
July	51500	19500	19500	51500
Aug	51500	19500	21500	49500
Sep	31500	19500	23000	46000
Oct	28000	19500	25500	40000
Nov	22000	19500	29500	30000
Dec	12000	19500	20500	29000

B) cash receipts

Month Receipts	Total sales ($)	cash sales 40%	Credit sales 60%
Jan 12000+18000=30000	45000	18000	27000
Feb 27000+14400=41400	36000	14400	21600
March 21600+11600=33200	29000	11600	17400
Apr 17400+12400=29800	31000	12400	18600
May 18600+10000=28600	25000	10000	15000
Jun 15000+23600=38600	59000	23600	35400
July 35400+15600=51000	39000	15600	23400
Aug 23400+17200=40600	43000	17200	25800
Sep 25800+18400=44200	46000	18400	27600
Oct 27600+20400=48000	51000	20400	30600
Nov 30600+23600=54200	59000	23600	35400
Dec 35400+16400=51800	41000	16400	24600

C) cash payments

	Production payment @$1 per unit	other payment Per mnth	total($)
Jan	19500	9100	28600
Feb	19500	9100	28600
Mar	19500	9100	28600
Apr	19500	9100	28600
May	19500	9100	28600
Jun	19500	9100	28600
July	19500	9100	28600
Aug	19500	9100	28600
Sep	19500	9100	28600
Oct	19500	9100	28600
Nov	19500	9100	28600
Dec	19500	9100	28600

D) cash budegt

	Opening (a)	receipts (b)	payment (c)	closing (a+b-c)
Jan	3000	30000	28600	4400
Feb	4400	41400	28600	17200
Mar	17200	33200	28600	21800
Apr	21800	29800	28600	23000
May	23000	28600	28600	23000
Jun	23000	38600	28600	33000
July	33000	51000	28600	55400
Aug	55400	40600	28600	67400
Sep	67400	44200	28600	83000
Oct	83000	48000	28600	102400
Nov	102400	54200	28600	128000
Dec	128000	51800	28600	151200

E) schedule of current assets

	Inventory	Receivables	Cash
Jan	26000	27000	4400
Feb	27500	21600	17200
Mar	32500	17400	21800
Apr	36500	18600	23000
May	43500	15000	23000
Jun	51500	35400	33000
July	51500	23400	55400
Aug	49500	25800	67400
Sep	46000	27600	83000
Oct	40000	30600	102400
Nov	30000	35400	128000
Dec	29000	24600	151200

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