Company Information:

A small company employs four workers to run and operate its production process.

They work eight-hour days, twenty days per month.

Each employee produces 2 units per hour and is paid $6 per unit produced.

The owner decides to expand production and hires one additional worker in each of months

3 and 4, and two additional workers in month 5.

The cost of materials is $5 per unit.

The owners annual salary is $54,000

SS tax is 7.65% (FICA & Medicare), Unemp. is 0, Other Benefits are 0.14.

The final product price is $50.

40% of sales are on account.

Accounts receivable 40% collected in month of sale, 40% in month following, 10% in second

month following and the rest in third month following. No allowance for bad debt expense.

Three-month supply of inventory will be kept.

Annual long-term loan interest rate is 4%.

Minimum cash (monthly) is $15,000.

Monthly rent for the building housing the manufacturing process is $2,000.

Utilities and maintenance for the manufacturing building are $500 per month.

The owner has $180 telephone and $370 transportation bills per month, respectively. Both expenses related to managing the company.

Legal and accounting fees are $1,000 and $1,500 per month respectively.

The owner hired a subcontractor, paid $24,000 annually to handle sales.

New equipment purchase in month 4, cost $90,000, with a depreciation period of 5 years.

A new office building is purchased in month 6, cost $150,000, with a depreciation period of

30 years.

60% of monthly expenses are paid next month.

The owner borrowed $500,000 long-term loan.

Investment by owners is $35,000 in month 1.