Cover Inc.

A group of four ASU students decide to launch an iPhone cover company - Cover. 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.