Ca
Beginning Balance
Nov-13
Dec-13
Jan-14
Feb-14
$ 10,000.00 $ 9,360.00 $ 8,720.00 $ 8,080.00
Expected Cash Receipts
perceived level of quality
unit sales
margin % x 100
retail price based on margin
Cash Sales
$
$
mid
mid
mid
mid
15
15
15
15
2.00
2.00
2.00
2.00
384.00 $
384.00 $
384.00 $
384.00
5,760.00 $ 5,760.00 $ 5,760.00 $ 5,760.00
Expected Cash Payments
labor costs (average of 176 hrs per
month * $20 per hour)
electricity
marketing
total fixed costs
material costs based on production
Total Cash Expenses
$
$
$
$
$
$
3,520.00
200.00
1,000.00
4,720.00
1,680.00
6,400.00
monthly profit
$
Ending Cash Balance
$
$
$
$
$
$
$
(640.00) $
9,360.00
3,520.00
200.00
1,000.00
4,720.00
1,680.00
6,400.00
$
$
$
$
$
$
(640.00) $
$ 8,720.00
3,520.00
200.00
1,000.00
4,720.00
1,680.00
6,400.00
$
$
$
$
$
$
(640.00) $
$ 8,080.00
3,520.00
200.00
1,000.00
4,720.00
1,680.00
6,400.00
(640.00)
$ 7,440.00
Cash Budget
Mar-14
$ 7,440.00 $
Apr-14
May-14
Jun-14
Jul-14
Aug-14
8,160.00 $ 12,720.00 $ 19,600.00 $ 28,800.00 $ 40,320.00
mid
high
high
high
high
high
20
20
25
30
35
40
2.00
3.00
3.00
3.00
3.00
3.00
$
384.00 $
576.00 $
576.00 $
576.00 $
576.00 $
576.00
$ 7,680.00 $ 11,520.00 $ 14,400.00 $ 17,280.00 $ 20,160.00 $ 23,040.00
$
$
$
$
$
$
$
3,520.00
200.00
1,000.00
4,720.00
2,240.00
6,960.00
$
$
$
$
$
$
3,520.00
200.00
1,000.00
4,720.00
2,240.00
6,960.00
$
$
$
$
$
$
3,520.00
200.00
1,000.00
4,720.00
2,800.00
7,520.00
$
$
$
$
$
$
3,520.00
200.00
1,000.00
4,720.00
3,360.00
8,080.00
$
$
$
$
$
$
720.00 $
4,560.00
$
6,880.00 $
9,200.00
$ 11,520.00
$ 13,840.00
$ 19,600.00 $ 28,800.00
$ 40,320.00
$ 54,160.00
$ 8,160.00 $ 12,720.00
3,520.00
200.00
1,000.00
4,720.00
3,920.00
8,640.00
$
$
$
$
$
$
3,520.00
200.00
1,000.00
4,720.00
4,480.00
9,200.00
Sep-14
Oct-14 1 yr totals
$ 54,160.00 $ 68,000.00
high
high
40
40
310
3.00
3.00
$
576.00 $
576.00
$ 23,040.00 $ 23,040.00 $ 163,200.00
$
$
$
$
$
$
3,520.00
200.00
1,000.00
4,720.00
4,480.00
9,200.00
$
$
$
$
$
$
3,520.00
200.00
1,000.00
4,720.00
4,480.00
9,200.00
$
$
$
$
$
$
42,240.00
2,400.00
12,000.00
56,640.00
34,720.00
91,360.00
$ 13,840.00 $ 13,840.00
$
71,840.00
$ 68,000.00 $ 81,840.00
$
81,840.00
AP Manufacturing
Instructions
The deliverable in this assignment is three Pro Forma Monthly Cash Flow Statements and a one page narrative. The
narrative will discuss factors that could cause a deviation from the projection, and what steps could be taken to address
any unfavorable deviations. See the “Key Assumptions” section to help identify these factors. Relevant project data and
a template for the Pro Forma Cash Flow Statements are given below.
Project Background
AP Manufacturing is a specialty manufacture and has recently entered into a one year contract to produce product’s A
and B. AP Manufacturing receives the order for the exact number of units at the beginning of each month, and
manufactures and delivers all units before the end of that month. AP Manufacturing receives payment in full the month
after product delivery. Materials must be purchased with cash. All employees are independent contractors, and are
paid at the end of each month for hours worked. The project will run from January 1 st through December 31st. Rent and
electric bills are paid at the end of each month. AP Manufacturing’s beginning cash balance is $650,000.
Equipment Purchase and Loan Data
AP Manufacturing will incur one time equipment costs at the initiation of the project of $250,000. This will be partially
financed with a $210,000 bank loan. The balance will be paid in cash. See the terms of the loan below;
Loan Information
Interest Rate:
6.50%
Loan Term: 12 Months
12 Months
28th of Each Month
Payment due date:
The first 11 payments are interest only, the final payment includes that months interest and the loan principal.
Sales Forecast
AP Manufacturing is paid $245 per unit for product A and $475 per unit for product B. The number of units ordered is
seasonal and varies based on demand. The below matrices estimate unit demand in above average, average, and below
average economic conditions. To project unit demand in a particular month, take a weighted average of the three
scenarios. Round to the closest unit.
Probability that economic conditions are above average
Probability that economic conditions are average
Probability that economic conditions are below average
Demand for Product A
30%
40%
30%
Demand for Product B
January
Above Average Economy
Average Economy
Below Average Economy
2,436 Units
2,014 Units
1,601 Units
January
Above Average Economy
Average Economy
Below Average Economy
912 Units
740 Units
612 Units
February
Above Average Economy
Average Economy
Below Average Economy
2,577 Units
2,128 Units
1,644 Units
February
Above Average Economy
Average Economy
Below Average Economy
900 Units
708 Units
580 Units
March
Above Average Economy
Average Economy
Below Average Economy
2,602 Units
2,199 Units
1,700 Units
March
Above Average Economy
Average Economy
Below Average Economy
864 Units
648 Units
531 Units
Direct Cash Costs
Unit Cost Product A
Labor
4 hours at $30/hour ($120)
Materials
$40
Unit Cost Product B
Labor
6 hours at $30 per hour ($180)
Materials
$115
Other Monthly Cash Expenses
Rent
Electricity
$10,000 per month
$12.50 per kilowatt hour. AP Manufacturing uses a fixed 200 kilowatt hours per month, plus 1.0 kilowatt
hour for each unit produced.
Pro Forma Cash Flow Statement Template
Cash Flow Statement for Month Ending XX/XX
Cash Flow from Operating Activities
Cash receipts from customers
$
Cash paid to suppliers
$( )*
Cash paid to employees
$( )*
Cash paid for electricity
$( )*
Cash paid for rent
$( )*
Interest Paid
$( )*
Net cash flows from operations
$
Cash flows from investing activities
Equipment purchases
$( )*
Proceeds from equipment sales
$
Net cash flows from investing activities
$
Cash Flows from financing activities
Proceeds from loan
$
Repayment of loan principal
$( )*
Net cash flows used in financing activities
$
Net change in cash and cash equivalents
$
Cash and cash equivalents, beginning of month
$
Cash and cash equivalents, end of month
$
*Use parentheses to indicate a cash outflow.
Key Assumptions
Material costs assumptions are based on current market prices at the beginning of the year. Product demand was estimated base
on past performance of similar products in various economic conditions. Rent is fixed per the lease agreement. The terms of the
loan are fixed and cannot be adjusted by either party.
The labor hours estimation is based on prototype work and the assumption that speed will improve as the labor force becomes
more experienced over the course of the year. The electricity cost estimation is based on current rates, which can change.
Electricity usage estimations are based on past experience manufacturing similar but not identical products. The equipment
selling price is based on current market prices of comparable equipment with total machine hours close to what AP
Manufacturing predicts will be use during the course of the project.
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