Production cash outflow. National Beverage Company produces its products two mon
ID: 2592982 • Letter: P
Question
Production cash outflow. National Beverage Company produces its products two months in advance of anticipated sales and ships to warehouse centers the before sale. The ventory safety stock is 10% of the anticipated month's sale. Beginning inventory n October 2014 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 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: $1,900,000 (October), $2,050,000 (November), and $2,200,000 (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 $ (Round to the nearest dollar.) The raw materials cost is s. (Round to the nearest dollar.) The shipping cost is SD (Round to the nearest dollar) In what months does the production cash outflow for the month of October 2014 production occur? The production cash outflow for the month of October 2014 production is as follows: (Select the best response. Due to rounding, numbers below might differ from your original answers a few dolilar units.) O A. O B. September for raw materials, $398,750; October for shipping. S79750; November for labor, S31 9,000. September for raw materials, $398,750; October for labor, $319,000; November for shipping, $79,750. O C. September for labor, $319,000; October for raw materials, $398,750; November for shipping, $79,750. D. September fr shipping, $79,750; October for raw materials, $398,750, November for labor, S31 9,000. Click to select your answer(s)Explanation / Answer
Particulars
$
Units sale forecast for the month of December
3142857
units
(2200000/0.70)
Safety stock : 10% of 3142857
314286
units
Beginning inventory 2014
267143
units
Production needed in October
December sales+ Safety stock - beginning inventory
3142857+314286-267143
3190000
units
Cost of production in October 2014
3190000*0.25
797500
Labor cost :40% of 797500
319000
Material cost: 50% of 797500
398750
shipping cost : 10% of 797500
79750
The production outflow for the month of October 2014 production is as follows
Ans B
September: Raw materials 3989750
Labor: 319000
Material cost: 398750
Particulars
$
Units sale forecast for the month of December
3142857
units
(2200000/0.70)
Safety stock : 10% of 3142857
314286
units
Beginning inventory 2014
267143
units
Production needed in October
December sales+ Safety stock - beginning inventory
3142857+314286-267143
3190000
units
Cost of production in October 2014
3190000*0.25
797500
Labor cost :40% of 797500
319000
Material cost: 50% of 797500
398750
shipping cost : 10% of 797500
79750
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