35 cost to produce (per unit) VARIABLE COSTS

10000 monthly costs FIXED COSTS

55 selling costs (per unit)

Medieval Adventures Company BALANCE SHEET

ASSETS
Cash 146,250
A/C 68,750
Inventory 35,000
250,000

EQUITIES
Common Stoc 250,000
Retained Earn 0
250,000

500 November sales

750 december sales
1000 Expected January Sales
500 increases every month after that!!
3000 expected May sales!
5000 expected September sales

30 days in advanced of predicted sales

COSTS PAID IN CASH IN THE MONTH IN WHICH THEY WERE INCURRED.

DID NOT STRICTLY ENFORCE CREDIT TERMS

60000 Profit by March 31 end.

BANK BALANCE WAS ALMOST ZERO SO MATERIAL COULD NOT BE PURCHASED.

NEEDED TO PURCHASE MORE CASH
Medieval Adventures Company

Variable
Monthly Unit Sales Production Sales Revenue Production Costs

October ?? ??
November 500 750 $27,500.00 $26,250.00
December 750 1000 $41,250.00 $35,000.00
January 1000 1500 $55,000.00 $52,500.00
February 1500 2000 $82,500.00 $70,000.00
March 2000 2500 $110,000.00 $87,500.00
April 2500 3000 $137,500.00 $105,000.00
May 3000 3500 $165,000.00 $122,500.00
June 3500 4000 $192,500.00 $140,000.00
July 4000 4500 $220,000.00 $157,500.00
August 4500 5000 $247,500.00 $175,000.00
September 5000 5500 $275,000.00 $192,500.00
October 5500 6000 $302,500.00 $210,000.00
What We Know:

Unit Cost To Produce 35

Unit Selling Price 55
Monthly Fixed Costs $10,000.00
Opening Capital (cash) $250,000.00
Products Made One Month Prior To Shipping (Inventory)
Payments Made By Customers 30-60 days After Sale (Accts Rec)

Month Cash A/R Inventory Assets

Dec $146,250.00 $68,750.00 $35,000.00 $250,000.00
Jan $111,250.00 $96,250.00 $52,500.00 $260,000.00
Feb $72,500.00 $137,500.00 $70,000.00 $280,000.00
Mar $30,000.00 $192,500.00 $87,500.00 $310,000.00
Apr -$2,500.00 $247,500.00 $105,000.00 $350,000.00
May -$25,000.00 $302,500.00 $122,500.00 $400,000.00
Jun -$37,500.00 $357,500.00 $140,000.00 $460,000.00
Jul -$40,000.00 $412,500.00 $157,500.00 $530,000.00
Aug -$32,500.00 $467,500.00 $175,000.00 $610,000.00
Sep -$15,000.00 $522,500.00 $192,500.00 $700,000.00
Oct $12,499.00 $577,500.00 $210,000.00 $799,999.00
Q1
-$40,000.00 would be needed for a loan starting in MARCH/APRIL timeframe
Starting in August they can cover their cash problem.

Q2
Because they are paying costs IMMEDIATELY, while waiting 2 months for cash coming in. They could have avoided t

Q3
Calculate CF with indirect method
 Monthly Cash Monthly Cash
Fixed Costs Monthly Income Collections Flow CASH BUDGET

$10,000.00 $0.00 $0.00

$10,000.00 $5,000.00 $0.00
$10,000.00 $10,000.00 $27,500.00 -$35,000.00 $35,000.00
$10,000.00 $20,000.00 $41,250.00 -$38,750.00 $38,750.00
$10,000.00 $30,000.00 $55,000.00 -$42,500.00 $42,500.00
$10,000.00 $40,000.00 $82,500.00 -$32,500.00 $32,500.00
$10,000.00 $50,000.00 $110,000.00 -$22,500.00 $22,500.00
$10,000.00 $60,000.00 $137,500.00 -$12,500.00 $12,500.00
$10,000.00 $70,000.00 $165,000.00 -$2,500.00 $2,500.00
$10,000.00 $80,000.00 $192,500.00 $7,500.00 -$7,500.00
$10,000.00 $90,000.00 $220,000.00 $17,500.00 -$17,500.00
$10,001.00 $99,999.00 $247,500.00 $27,499.00 -$27,499.00

Notes Pay Stock R/E L+OE

$0.00 $250,000.00 $0.00 $250,000.00
$0.00 $250,000.00 $10,000.00 $260,000.00
$0.00 $250,000.00 $30,000.00 $280,000.00
$0.00 $250,000.00 $60,000.00 $310,000.00
$0.00 $250,000.00 $100,000.00 $350,000.00
$0.00 $250,000.00 $150,000.00 $400,000.00
$0.00 $250,000.00 $210,000.00 $460,000.00
$0.00 $250,000.00 $280,000.00 $530,000.00
$0.00 $250,000.00 $360,000.00 $610,000.00
$0.00 $250,000.00 $450,000.00 $700,000.00
$0.00 $250,000.00 $549,999.00 $799,999.00
n. They could have avoided this by being less lax with cash receivables.
DERIVED
CASH Deferred Prepaid
FLOW--> Net Income Taxes A/R Inv Expenses Payables Disposal

$30,000 $0 -$55,000 -$17,500 0 0 $0

$40,000 $0 -$55,000 -$17,500 0 0 $0
$50,000 $0 -$55,000 -$17,500 0 0 $0
$60,000 $0 -$55,000 -$17,500 0 0 $0
$70,000 $0 -$55,000 -$17,500 0 0 $0
$80,000 $0 -$55,000 -$17,500 0 0 $0
$90,000 $0 -$55,000 -$17,500 0 0 $0
$99,999 $0 -$55,000 -$17,500 0 0 $0
Cash Flow

-$42,500
-$32,500
-$22,500
-$12,500
-$2,500
$7,500
$17,500
$27,499