Question

Esquire Products Inc. expects the following monthly sales:

January	\(28,000
February	\)19,000
March	\(12,000
April	\)14,000
May	\(8,000
June	\)6,000
July	\(22,000
August	\)26,000
September	\(29,000
October	\)34,000
November	\(42,000
December	\)24,000
Total annual sales	\(264,000

Cash sales are 40 percent in a given month, with the remainder going into accounts receivable. All receivables are collected in the month following the sale. Esquire sells all of its goods for \)2 each and produces them for \(1 each. Esquire uses level production, and average monthly production is equal to annual production divided by 12.

c. Determine a cash payments schedule for January through December. The production costs (\)1 per unit produced) are paid for in the month in which they occur. Other cash payments (besides those for production costs) are $7,400 per month.

Short answer

The cash payment per monthis $18,400.

Step-by-step solution

Meaning of cash payments

The cash payment refers to the money paid by the organization for its expenditures. These payments result in a decrease in cash balance and the decrease in accounts payables of the organization.

Cash payments schedule

Month	January	February	March	April	May	June
11,000 units X $1	$11,000	$11,000	$11,000	$11,000	$11,000	$11,000
Other cash payments	$7,400	$7,400	$7,400	$7,400	$7,400	$7,400
Total cash payments	$18,400	$18,400	$18,400	$18,400	$18,400	$18,400

Month	July	August	September	October	November	December
11,000 units X $1	$11,000	$11,000	$11,000	$11,000	$11,000	$11,000
Other cash payments	$7,400	$7,400	$7,400	$7,400	$7,400	$7,400
Total cash payments	$18,400	$18,400	$18,400	$18,400	$18,400	$18,400