SALES PROJECTIONS

Wilson Sports basketball sales in August were 150,000 units. Sales are expected to grow by 2% in September. October sales are expected to be 1,000 units less than in September. November sales will be 3% more than October. The selling price of the basketballs will remain the same $30 per unit. December sales projection is 157,000 units.

INVENTORY POLICIES

FINISHED GOODS

MAINTAIN AND ENDING INVENTORY EQUAL TO 25% OF NEXT MONTH SALES

ACTUAL BEGINNING INVENTORY 38,500 UNITS

DIRECT MATERIALS

MAINTAIN AND ENDING INVENTORY EQUAL TO 30% OF NEXT MONTH PRODUCTION

ACTUAL BEGINNING INVENTORY 9,000 POUNDS

The cost of materials purchased in August were $210,000

REQUIREMENTS

Each basketball requires .25 pounds of materials at a cost of $7 per pound. December production are projected to be 156,000 units.

Each basketball requires 15 minutes of labor at a rate of $12.00 per hour

Fixed Overhead is $400,000 monthly and variable overhead is assigned as 130% of direct labor

SELLING AND ADMINISTRATIVE EXPENSES

Commissions are 10% of Sales and Sales salaries are $90,000 monthly

General & Administrative Expenses are $150,000

OTHER EXPENSES AND CASH FLOWS

A new machine at a total cost of $2,500,000 will be purchase in September

Cash dividends of $2 million will be paid in October

Last quarter taxes of $2,200,000 will be paid in October, because taxes are paid in next quarter at tax rate of 35%

CASH POLICY

The firm requires an ending cash balance of $350,000.

Actual cash balance is $350,000

The firm has a short credit arrangement (credit line) with The National Bank. If the cash balance is lower than the required ending balance, the firm borrows from the bank. If the cash balance is higher than the required ending balance, the firm will pay the loan to the bank. The outstanding loan balance is $1,000,000 and the bank charges a 1% monthly interest rate.

80% of sales are cash sales and the remaining 20% collected one month later.

90% of direct materials purchased are paid in cash and the remaining 10% are paid in the next month.

CALCULATE TOTAL CASH AVAILABLE FOR OCTOBER