We are in the year 2021 again.  Mask Manufacturing produces and sells non-medical masks.  Their masks sell for $5.75 each.  Total quantity of masks on hand as of January 1 were 15,000.  Goal is to have 25% of next month's sales on hand at the end of each month.  First quarter sales are below.  April and May sales are forecast to be 60,000 units each month.  Last year:  November and December sales were $200,000 each month.  Other information:                           

-         Sales are 25% cash and 75% on credit.  Of the credit sales, collections are forecast at:  25% current month, 50% following month, and 25% the 2nd following month. 

-         Production cost for masks is $4.00 each ($1.50 for labour, $1.50 for materials and $1.00 for overhead).  Labour is paid in the current month.  Materials are purchased in the month they are used, and paid in the following month.  Overhead expenses are paid in the current month.

-         The company must make a one-time payment of $50,000 in February for royalties. 

-         Management requires a minimum cash balance of $25,000. 

a) Do a production budget for each of the first 3 months of 2021.  (5 marks)

b) Do a schedule of cash receipts for each of the first 3 months of 2021.  (7 marks)

c) Do a cash flow forecast for each of the first 3 months of 2021. Include short-term borrowing if required. (8 marks)                                                            

You may choose to combine parts b) and c) if you wish.                                                                

                                                                       

Budgeted volumes for 2021                              Jan            Feb           Mar          April

Sales - Units                                                      60,000       40,000     50,000      60,000