12. Consider the following information:

Each unit sells for $500. Regular production and overtime production costs are $350 and $450 per unit, respectively.
The cost to hold a unit in inventory for one month is $10.

a. (**) Develop a cash flow analysis for this problem. Be sure to calculate net cash flow and cumulative net cash flow for each month.

b. (**) Why do the net cash flows for April and May look so much better than those for the other months? What are the implications for building up and draining down inventories under a level production plan?

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SALES MONTH FORECASTED REGULAR OVERTIME ENDING PRODUCTION PRODUCTION INVENTORY January 800 units 1150 units 0 units 350 units February 1000 1150 0 500 March 1200 1150 0 450 April 1400 1150 0 200 May 1600 1150 150 0 June 1500 1150 350 0