Pharma Pesticides Corp

question 42

Essay

Pharma Pesticides Corp.uses the sales forecast to plan production.The company produces the bug killer "2K Spray" one month in advance of the forecasted sale.The January sales forecast of 380 units will be scheduled for December production.However,the company also notes that sales forecasts and actual sales can differ,and the company has a policy of having 10% in inventory to accommodate sales above forecast.Raw materials for 2K Spray are acquired the month ahead (in this case,November).Wages are paid in the current month of production (December).Utilities are paid a month after production (January),and shipping is paid a month after the sale (two months after production,February).Finally,an inventory count reveals that there are currently 30 units on hand above the projected sales for November (at the start of November when the raw material order is placed).Unit production costs are $500 for raw materials,$300 for wages,$200 for utilities,and $100 for shipping.Determine the month of cash outflow for a December production.What would you need to determine January's cash outflow? What would complicate this process?

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Definitions:

Occurrence

An event that happens or takes place.

Chance

The occurrence of events in the absence of any deliberate design or predictable cause.

Motivation

The reason or reasons one has for acting or behaving in a particular way; an internal process that makes a person move toward a goal.

Performance

The act of executing a task or function, often measured against predefined standards.