Cash sales are 40 percent in a given month, with the remainder going into accoun

Question

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.

Generate a monthly production and inventory schedule in units. Beginning inventory in January is 14,000 units.

Prepare a cash receipts schedule for January through December. Assume that dollar sales in the prior December were $20,000.

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 $7,600 per month.

Construct a cash budget for January through December using the cash receipts schedule from part band the cash payments schedule from part c. The beginning cash balance is $3,000, which is also the minimum desired. (Leave no cells blank - be certain to enter "0" wherever required. Negative amounts should be indicated by a minus sign.)

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.

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Esquire Products Inc. expects the following monthly sales:

Explanation / Answer

Answer:

a)

b)

No of units sold & cost of sales Sales price per unit = $2 p.u. and Cost is $1 Sales in $ Unit sold Cost of unit sold   January 30000 15000 15000   February 21000 10500 10500   March 14000 7000 7000   April 16000 8000 8000   May 10000 5000 5000   June 8000 4000 4000   July 24000 12000 12000   August 28000 14000 14000   September 31000 15500 15500   October 36000 18000 18000   November 44000 22000 22000   December 26000 13000 13000 Total 288000 144000 144000 Monthly production = Annual Production/12 = 144,000/12 12000 Assume Annual sales = Annual production

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