Question
Nolan Johnson is CFO for a newly formed furniture manufacturing company. Below is the anticipated monthly production for the first year of operation, and beyond.
Nolan Johnson is CFO for a newly formed furniture manufacturing company. Below is the anticipated monthly production for the first year of operation, and beyond. Nolan is interested in learning which of the first twelve months will require cash outlays of more than $100,000 toward the purchase of lumber.
Each unit requires 20 board feet of lumber at $5.80 per board foot. All lumber is purchased in the month prior to its expected use. Lumber purchases are paid for 10% in the month of purchase, 40% in the month following the month of purchase, and 50% in the second month following the month of purchase.
Month Units
January 0
February 800
March 500
April 1,200
May 700
June 900
July 300
August 600
September 800
October 1,300
November 400
December 400
January 600
Which months will require cash outlays in excess of the $100,000 amount? Does the production in any given month necessarily correspond to the cash flow for that same month? What are the business implications of your observation?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started