Problem 1

Clint Swinginheimer is CFO for a newly formed golf club manufacturing company.

Below is the anticipated monthly production for the first year of operation, and

beyond. Clint is interested in learning which of the first eighteen months will require

cash outlays of more than $30,000 toward the purchase of composite shafts. Each unit

requires 6 board feet of composite material at $17.75 per board foot. All composite

material is purchased in the month prior to its expected use. Composite shaft

purchases are paid for 20% in the month of purchase, 75% in the month following the

month of purchase, and 5% in the second month following the month of purchase.

Month

Januarv

Units

0

February

March

April

Mav

June

July

August

September

October

November

December

January

February

March

April

May

June

1300

350

300

500

480

360

380

275

240

1190

190

220

280

340

400

500

480

1. Which months will require cash outlays in excess of the $25,000 amount?

2. 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?