eash [low budget Retum to problem 12, Chapter 14, where a linear program was used to loeate an optimal production schedule. To avoid overwhelming detail, now assume the data relate to a quarter; so the optimal plan calls for production of ql = 50 (and lb =

0) in each of the next three months. Also assume, for convenience, that direct labor is paid at the end of the current month, while direct material suppliers are paid with a one month lag. 70% of the customers pay with a one month lag, while the others pay immediately. 40% of the "fixed" costs, the intercepts of the various LLAs, are accounting aecruals; the remainder as weIl as the "variable" portions are cash expenditures that are paid at the end of the respective months. Prepare a statement of month-by-month cash flows for this production plan. Notice in the fourth month you wiIl record some cash items but none associated with production in the fourth month, just as in the first month you will record cash flows associated with the current plan but none associated with existing payables or receivables.

AppendixLO1