The controller of Harrington Company estimates sales and production for the first four months of 2012 as follows:
|
|
January
|
|
February
|
|
March
|
|
April
|
Sales
|
|
$30,500 |
|
$41,800
|
|
$53,100
|
|
$25,200
|
Production in units
|
|
1,070 |
|
1,630 |
|
2,140 |
|
2,650 |
Sales are 40% cash and 60% on account, and 60% of credit sales are collected in the month of the sale. In the month after the sale, 40% of credit sales are collected. It takes 5 kg of direct material to produce a finished unit, and direct materials cost $4 per kg. All direct materials purchases are on account, and are paid as follows: 40% in the month of the purchase, 60% the following month. Ending direct materials inventory for each month is 40% of the next month's production needs.
January's beginning materials inventory is 2,140 kg. Suppose that both accounts receivable and accounts payable are zero at the beginning of January.