Question 5 January February March Cash Inflows Cash Sales 2,187,500 1,875,000 3,125,000 Collections From Receivables 2,500,000 2,187,500 1,875,000 Total Cash Inflows 4,687,500 4,062,500 5,000,000 Cash Outflows Production Costs 2,512,500 2,700,000 3,862,500 Net Cash Flows 2,175,000 1,362,500 1,137,500 Cash Inflows Given: 50% of sales are for cash 50% are on credit and are paid in full in one month's time January Jan Sales: 175,000 units x 25 = 4,375,000 x 50% = 2,187,500 Cash Sales Dec Sales: 200,000 units x 25 = 5,000,000 x 50% = 2,500,000 Collections from Receivables February Feb Sales: 150,000 units x 25 = 3,750,000 x 50% = 1,875,000 Cash Sales Jan Sales: 175,000 units x 25 = 4,375,000 x 50% = 2,187,500 Collections from Receivables March Mar Sales: 250,000 units x 25 = 6,250,000 x 50% = 3,125,000 Cash Sales Feb Sales: 150,000 units x 25 = 3,750,000 x 50% = 1,875,000 Collections from Receivables Production Costs Given: Units are produced one month in advance of sales 30% of cost of production is paid in the current month of production 70% cost of production is paid in the month following production January Dec Production /Jan Sales: 175,000 units x 15 = 2,625,000 x 70% = 1,837,500 Jan Production /Feb Sales: 150,000 units x 15 = 2,250,000 x 30% = 675,000 2,512,500 February Jan Production /Feb Sales: 150,000 units x 15 = 2,250,000 x 70% = 1,575,000 Feb Production /Mar Sales: 250,000 units x 15 = 3,750,000 x 30% = 1,125,000 2,700,000 March Feb Production /Mar Sales: 250,000 units x 15 = 3,750,000 x 70% = 2,625,000 Mar Production /Apr Sales: 275,000 units x 15 = 4,125,000 x 30% = 1,237,500 3,862,500