A group of four students decide to launch an iPhone cover company $-$ iCover. These covers have strong lateral tension that almost doubles the force required to bend the iPhone. Company will outsource manufacturing to a diverse manufacturing firm$-$ iMake, and sell the covers online. There are two main options for distributing the covers:

$1)$ Walmart.com

$2)$ Amazon.com

On average, Amazon and Walmart.com will charge fees equivalent of $10\%$ of the sales. Customer will buy the product on one of these websites for a fixed price of $$30.$ Goods posted for sale on both the websites are sold within a month of posting. Amazon will remit payments to the seller account in $60$ days. While Walmart.com will remit payments in $30$ days.

iMake$-$ manufacturer of the covers$-$ will produce covers according to the following sales schedule.

Projected Unit Sales

$2021(,000)$

January $10$

February $20$

March $50$

April $100$

May $100$

June $100$

July $100$

August $100$

September $100$

October $100$

November $100$

December $100$

COGS is $50\%$ of the sales. You are planning to contract with the supplier to make payment $30$ days after delivery. The company will stop operations at end of one year.

Questions for Analysis

$1)$ For each distributor, calculate the cash balance $($Total inflows of cash $$Total outflows of cash$)$ for each month for next one year. In the course video I show you the analysis for Amazon. Replicate the analysis for Walmart. Remember the only difference between the two is the extra month of accounts receivable.

$2)$ Calculate the maximum cash shortfall?

$3)$ Compare the two options$-$ Walmart vs$.$ Amazon and explain why there is difference between the two.

$4)$ Calculate the maximum cash shortfall for Amazon option if your supplier demands cash on delivery. This will reduce your Accounts payable from $30$ days to zero.