The units are expected to sell for $48 each. Pocket Pieces sells all merchandise on credit. Historically, Pocket Pieces receives 55% of each quarter's sales during the quarter and 45% in the next quarter.

2. Pocket Pieces plans to stock ending inventory of finished goods to equal 25% of the next quarter's sales. Finished Goods inventory at 1/1/2024 is 200 units at a cost of $24.50 per unit. Pocket Pieces uses FIFO to account for finished goods inventory.

3. The units are made with a high-quality resin and paint. The units each require 5 ounces of resin at a cost of $0.75 per ounce. In addition, the units require 3 ounces of paint at $0.40 per ounce. At the beginning of 2024, Pocket Pieces had 450 ounces of resin on hand and no paint on hand. Pocket Pieces plans to keep 30% of the resin and paint required for next quarter's production in inventory at the end of each quarter. Pocket Pieces pays for all purchases 45% in the quarter of purchase and 55% in the quarter following purchase.

4. Each unit requires 0.8 hours of direct labor at $18.75 per hour. Wages are paid on the last day of each month for that month's work. Other costs are paid in the quarter unless otherwise noted.

5. Variable overhead is estimated at $2 per direct labor hour. Fixed overhead costs are $34,000 per year. Fixed overhead includes depreciation of $7,000 per year.

6. Variable selling and administrative costs are $1.75 per unit. Fixed selling and admin costs are $40,000 per year. (This includes $3,000 of depreciation per year.)

7. Pocket Pieces makes quarterly income tax payments of $2,000 each. The corporate income tax rate is 30% of net income before taxes (consider any overpayments or underpayments on your balance sheet).

8. Pocket Pieces pays quarterly dividends of $1,500.9. Pocket Pieces will purchase additional equipment on the following schedule (depreciation is already included above):

Quarter 1 Quarter 2 Quarter 3 Quarter 4

$ 4,200 $ 2,750 $ - $ -

10. Pocket Pieces has to maintain a minimum cash balance of $10,000. Any projected borrowings are assumed to be borrowed at the beginning of the quarter. Payments are made at the end of the following quarters to the extent cash is available. All borrowings and repayments are made in $1,000 increments. Interest is paid at the time of repayment. Interest is calculated at 10% per year (no compounding).