Question

Note: The company desires a minimum ending cash balance each month on $35,000. The beard grooming...

Note: The company desires a minimum ending cash balance each month on $35,000. The beard grooming products are sold to retailers for $20 each and the sales have been stagnant due to the Covid-19. However, the marketing department has been positive toward the end of the year due to season change and upcoming holiday. The marketing department has just sent you their forecasted quarter sales and marketing budget.

Quarter

2020 Q4

2021 Q1

2021 Q2

2021 Q3

2021 Q4

2022 Q1

Sales in Unit

30,000

35,000

40,000

65000

68000

70,000

Marketing Expenses

$35,000

$20,000

$20,000

$45,000

$45,000

$45,000

The increased sales volume before and during June and January is due to Father’s Day and holidays with AATB being a favorite. Ending finished goods inventories are supposed to be equal to 20% of the next month’s sales in units. AATB currently does its own assembly production in house. Each unit consists of 3 shaves and the cost of each is $1.50. Each unit needs 0.10 labour hour from assemble to finish package. The hourly pay rate to the assembling workers is $15 per hour. The production manager also required desired direct material ending inventory to 30% of the next quarter production.

  • Purchases are paid for in the following manner: 50% in the quarter of the purchase and the remaining 50% paid in the quarter following the purchase. All sales to the distributors are made on credit terms with no discount (for now), and payable within 15 days. The AATB has determined that only 50% of sales are collected by the end of the quarter in which the sale occurred. An additional 30% is collected in the quarter following the sale, and the remaining 20% is collected in the second quarter following the sale. Bad debts have been negligible, supporting the credit terms as favorable.

Homework Answers

Answer #1
Q4 Q1 Q2 Q3 Q4 Q1
2020 2021 2021 2021 2021 2022
Sales units 30000 35000 40000 65000 68000 70000
Sales price per unit 20 20 20 20 20 20
Total sales consideration 600000 700000 800000 1300000 1360000 1400000
Marketing expense 35000 20000 20000 45000 45000 45000
Inventory to be maintained 7000 8000 13000 13600 14000 0
Production Required 37000 36000 45000 65600 68400 56000
Direct Material ending inventory required 32400 40500 59040 61560 50400 0
Direct Material required for current month 111000 108000 135000 196800 205200 168000
Total direct material to be procured 143400 116100 153540 199320 194040 117600
Cost per unit 1.5 1.5 1.5 1.5 1.5 1.5
Direct Material costs 215100 174150 230310 298980 291060 176400
Labor hours 3700 3600 4500 6560 6840 5600
Cost per hour 15 15 15 15 15 15
Direct Labor costs 55500 54000 67500 98400 102600 84000
Inventory to be maintained =next quarter's sales * 20%
Production required =Closing inventory to be aintained + Current month's demand-opening inventory
Direct material ending inventory =Next quarter's production *30% * 3 units per product
Direct Material for current month prodction =production required * 3 units per product
Direct Material prcured =Closing inventory to be maintained + current month's requirement-opening inventory
Labor hours required =production required * 0.10 per product
Cashflow Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3
2020 2021 2021 2021 2021 2022 2022 2022
Payments for purchases
Payment for Q4 2020 Purchase -107550 -107550
Payment for Q1 2021 Purchase -87075 -87075
Payment for Q2 2021 Purchase -115155 -115155
Payment for Q3 2021 Purchase -149490 -149490
Payment for Q4 2021 Purchase -145530 -145530
Payment for Q1 2022 Purchase -88200 -88200
Receipt for Q4 2020 Sale 300000 180000 120000
Receipt for Q1 2021 Sale 350000 210000 140000
Receipt for Q2 2021 Sale 400000 240000 160000
Receipt for Q3 2021 Sale 650000 390000 260000
Receipt for Q4 2021 Sale 680000 408000 272000
Receipt for Q1 2022 Sale 700000 420000 280000
Marketing expenses payment -35000 -20000 -20000 -45000 -45000 -45000 0
Wages payment -55500 -54000 -67500 -98400 -102600 -84000
Balance 101950 261375 440270 621955 787380 1005270 603800
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