Reference no: EM133115369

Cement Company anticipates the following fourth-quarter sales for 2021: $1,800,000 (October), $1,600,000 (November), and $2,100,000 (December). It posted the following sales figures for the third quarter of 2021: $1,900,000 (July), $2,050,000 (August), and $2,200,000 (September). Sales is anticipated to decrease by 10% in the first quarter of 2022.

The company sells 90% of its products on credit, and 10% are cash sales. The credit sales are collected as follows: 60% in the following month, 20% two months later, 19% three months later, with 1% defaults. What are the anticipated cash inflows for the last quarter of 2021?

California Cement Co. produces its products two months in advance of anticipated sales and ships to warehouse centre the month before sale. The inventory safety stock is 20% of the anticipated month's sale. Beginning inventory is 10% of units sold. Each unit costs $2.80 to make. The average sales price per unit is $5.75. The cost is made up of 30% labor, 65% materials, and 5% shipping (to the warehouse). The company pays for labor in the month of production, shipping the month after production, and raw materials the month prior to production. Calculate the production costs for the last quarter of 2021.

Other cash outflows of the company are as follows:

Salaries: $420,000 per month from July - September; $450,000 per month from

October onwards

Utilities: 5% of monthly sales

Other Operational cost: 10% of monthly sales

Safety Reserve: 5% of monthly cash sales

What are the anticipated cash outflows for the last quarter of 2021?

The company has access to borrowing for its needs from MyBank at 4% p.a. based on fixed rate and is paid 3.3% p.a. for surplus deposited into the bank's premier savings account.

Assess the company's cash needs for the last quarter of 2021.