Table A Consolidated Income Statement, 2009-2011 (in thousands of dollars)

2009
2010
Net sales
14,079
15,065
COGS
9,011
10,244
Gross profit
5,068
4,821
Operating expense
3,520
3,615
Interest expense
105
125
Interest income
17
19
Pretax profit
1,461
1,099
Income tax
497
374
Net income
964
725

2011
16,360
10,798
5,562
4,090
128
15
1,359
462
897

Seasonal production

Level Production
18000
11880
6120
4320
94
32
1738
591
1,147

18000
10800
7200
3540

identify what will change in IS and BS if it goes to level production

Revise these three statements
If it goes to level production ,overall costs is more than benefit or not?

Table B Balance Sheet at December 31, 2011 (in thousands of dollars)

Cash
Accounts receivable
Inventory
Current assets
PP&E
Total assets

500
5,245
1,227
6,972
2,988
9,960

Accounts payable
Notes payable, bank
Accrued taxes
Long-term debt, current portion
Current liabilities
Long-term debt
Total liabilities
Shareholders equity
Total liabilities and shareholders equity

966
826
139
100
2,031
1,000
3,031
6,929
9,960

Seasonal production
level production
500
500

Table C Monthly Sales (in thousands of dollars)

Sales
Projected Sales
2011
2012
January
671
702
February
393
486
March
360
414
April
311
378
May
180
162
June
196
180
July
474
378
August
769
540
September
2,896
2,970
October
2,618
2,520
November
4,564
5,724
December
2,928
3,546
16,360
18,000
Total

Exhibit 1 2012 Pro Forma Balance Sheets and Accured Taxes Under Seasonal Production (in thousands of dollars)

Cash
Accounts receivableb
Inventoryc
Current assets
Net PP&Ed
Total assets
a

Accounts payablee
Notes payable, bank
Accrued taxesf
Long-term debt, current portion
Current Liabilities
Long-term debtg
Total liabilities
Shareholders' equity
Total liabilities and equity
Accrued Taxes
Beg. accrued taxes
Accrual of monthly taxes
Tax payments
End. accrued taxes

Actual Dec
31, 2011
500
5,245
1,227
6,972
2,988
9,960

Jan

Feb
1,511
2,541
1,227
5,280
2,988
8,268

2,950
832
1,227
5,009
2,988
7,997

Mar
2,768
630
1,227
4,625
2,988
7,613

Apr
2,477
554
1,227
4,259
2,988
7,247

May
2,274
378
1,227
3,879
2,988
6,867

966
826
139
100
2,031
1,000
3,031
6,929
9,960

232
0
94
100
425
1,000
1,425
6,842
8,268

160
0
26
100
286
1,000
1,286
6,710
7,997

137
0
-188
100
49
1,000
1,049
6,564
7,613

125
0
-388
100
-163
1,000
837
6,409
7,247

53
0
-492
100
-339
1,000
661
6,206
6,867

139

139
-45
0
94

94
-68
0
26

26
-75
-139
-188

-188
-80
-120
-388

-388
-105
0
-492

Assumed maintenance of minimum $500,000 balance.

Assumed 60-day collection period for wholesale sales and instant collection for retail sales.
c
Assumed inventories maintained at December 31, 2011 level for all of 2012.
d
Assumed equipment purchases equal to depreciation.
a

Assumed equal to 50% of the current month's COGS for seasonal production; and was related to material purchases that accounts for 50% of COGS for 20
seasonal production and sales pattern.
e

Taxes payble on 2011 income are due March 15, 2012. On April 15, June 15, September 15, and December 15, 2012, payments of 25% of each of the estim
of $480,000. This implies a payment of $120,000 in April, June, September and December.
g
To be repaid at the at rate of $50,000 each June and December
f

Jun
1,946
239
1,227
3,413
2,988
6,401

Jul
1,625
391
1,227
3,243
2,988
6,231

Aug
1,246
643
1,227
3,116
2,988
6,104

59
0
-715
100
-556
950
394
6,007
6,401

125
0
-795
100
-571
950
379
5,851
6,231

-492
-103
-120
-715

-715
-80
0
-795

Sep

Oct

Nov

Dec

758
2,457
1,227
4,442
2,988
7,430

500
3,843
1,227
5,570
2,988
8,558

500
5,771
1,227
7,498
2,988
10,486

500
6,489 no change
1,227
8,216
2,988
11,204

178
0
-857
100
-578
950
372
5,732
6,104

980
0
-757
100
323
950
1,273
6,158
7,430

832
785
-590
100
1,126
950
2,076
6,482
8,558

1,889
80
-55
100
2,014
950
2,964
7,522
10,486

1,170
847
111
100
2,228
900
3,128
8,076
11,204

-795
-61
0
-857

-857
219
-120
-757

-757
167
0
-590

-590
536
0
-55

-55
285
-120
111

ounts for 50% of COGS for 2012. This represents a 30-day payment period. Since inventories are level, purchases will follow

nts of 25% of each of the estimated tax for 2012 are due. In estimating its tax liability for 2012, the company uses a tax liability

Exhibit 2 2012 Pro Forma Income Statement Under Seasonal Production (in thousands of dollars)
Jan
Feb
Mar
Apr
Net sales
702
486
414
378
a
COGS
463
321
273
249
Gross profit
239
165
141
129
Operating expensesb
Interest expense
Interest incomec
Profit (loss) before tax
Income taxesd
Net income

360
11
1
-132
-45
-87

360
7
3
-200
-68
-132

360
7
5
-222
-75
-146

May
162
107
55

360
7
5
-234
-80
-155

360
7
4
-308
-105
-203

Assumed cost of goods sold equal to 66% sales.

Assumed to be same for each month throughout the year.
c
2% annualized rate of return on monthly cash balances.
d
Negative figures are tax credits from operating losses, and reduced accured taxes shown on balance sheets. The federal tax rate on all earnings was 34%
a

Jan

Feb

Mar

Apr

May

Net sales
COGSa
Gross profit

702
900
-198

486
900
-414

414
900
-486

378
900
-522

162
900
-738

Operating expensesb
Interest expense
Interest incomec
Profit (loss) before tax
Income taxesd
Net income

360
11
1
-569
-193
-375

360
7
3
-779
-265
-514

360
7
5
-848
-288
-560

360
7
5
-885
-301
-584

360
7
4
-1,101
-374
-727

Jun

Jul

Aug

Sep

Oct

Nov

Dec

180
119
61

378
249
129

540
356
184

2,970
1,960
1,010

2,520
1,663
857

5,724
3,778
1,946

3,546
2,340
1,206

360
7
4
-302
-103
-200

360
7
3
-235
-80
-155

360
7
3
-181
-61
-119

360
7
2
645
219
426

360
7
1
491
167
324

360
11
1
1,576
536
1,040

360
7
1
839
285
554

7.3333333333

The federal tax rate on all earnings was 34%.

Jun

Jul

Aug

Sep

Oct

Nov

Dec

180
900
-720

378
900
-522

540
900
-360

2,970
900
2,070

2,520
900
1,620

5,724
900
4,824

3,546
900
2,646

360
7
4
-1,084
-368
-715

360
7
3
-886
-301
-585

360
7
3
-724
-246
-478

360
7
2
1,705
580
1,125

360
7
1
1,254
426
828

360
11
1
4,454
1,514
2,940

360
7
1
2,279
775
1,504

Total
18,000
11,880
6,120

18000
10800
7200

4,320
94
32
1,737
591
1,147

3,540
94
32
3,598
1223.32
$2,375
Materials purchased(2012)
5940

Total
18,000
10,800
7,200
4,320
94
32
2,817
958
1,859

Exhibit 3 2012 Pro Forma Cash Flow Statement Under Seasonal Production (in thousands of dollars)
Jan
Feb
Mar
Operating Activities
Net income
-87
-132
-146
Depreciation
25
25
25
Less: Increase (Decrease) in A/R
-2,704
-1,710
-202
Less: Increase (Decrease) in Inventory
0
0
0
Add: Increase (Decrease) in A/P
-735
-71
-24
Add: Increase (Decrease) in Accrued Taxes
-45
-68
-214
Cash flow from operations
1,862
1,464
-157
Investing Activities
Less: capital expenditures
Cash flow from operating and investing
Cash available before financing activities
Financing Activities
Less: bank note repayment
Less: debt repayment
Add: bank note issuance
Cash flow from financing
Total Cash Flow

Apr
-155
25
-76
0
-12
-200
-265

-25
1,837
1,837

-25
1,439
2,450

-25
-182
2,268

-25
-290
1,977

826
0
0
-826

0
0
0
0

0
0
0
0

0
0
0
0

1,011

1,439

-182

-290

Feb

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec

-203
25
-176
0
-71
-105
-178

-200
25
-139
0
6
-223
-253

-155
25
151
0
65
-80
-296

-119
25
252
0
53
-61
-354

426
25
1,814
0
802
99
-463

324
25
1,386
0
-149
167
-1,018

1,040
25
1,928
0
1,057
536
731

554
25
718
0
-719
165
-693

-25
-203
1,774

-25
-278
1,496

-25
-321
1,125

-25
-379
746

-25
-488
258

-25
-1,043
-785

-25
706
706

-25
-718
-718

0
0
0
0

0
50
0
-50

0
0
0
0

0
0
0
0

0
0
0
0

0
0
785
785

706
0
0
-706

0
50
768
718

-203

-328

-321

-379

-488

-258

LP
Jan
Operating Activities
Net income
Depreciation
Less: Increase (Decrease) in A/R
Less: Increase (Decrease) in Inventory
Add: Increase (Decrease) in A/P
Add: Increase (Decrease) in Accrued Taxes
Cash flow from operations
Investing Activities
Less: capital expenditures
Cash flow from operating and investing
Cash available before financing activities
Financing Activities
Less: bank note repayment
Less: debt repayment
Add: bank note issuance
Cash flow from financing
Total Cash Flow

Feb
-66
25
-2704
479
-516
-34
1634

mar
-122
25
-1710
608
0
-63
942

April
-143.23
25
-202
652
0
212.78
-355.44

-436.14
25
-76
673
0
344.68
-664.06

-25
1609
1609

-25
-25
-25
917 -380.444575639 -689.060970095
1699 1318.555424361 629.494454266

-836
0
0

0
0
0
0
0
0
0
0
1115.32
917 -380.444575639 426.2590299048

May

Jun
-219.39
25
-176
803
0
113.02
-707.77

Jul
-220.99
25
-139
792
0
233.84
-615.55

Aug
-175.38
25
151
673
0
90.35
-884.43

Sep
-138.64
25
252
576
0
71.42
-870.22

Oct
503.18
25
1,814
-882
0
-139.21
-543.44

Nov
386.00
1241.92
25
25
1,386
1,928
-612
-2,534
0
0
-198.85 -639.774780821
-561.85
1233.74

-25
-25
-25
-25
-25
-25
-25
-732.771229983 -640.547334338 -909.432675687 -895.218344521 -568.436237619 -586.849217484 1208.740970184
1012.043224283 -640.547334338 -909.432675687 -895.218344521 -568.436237619 -586.849217484 1208.740970184

0
0
0
0
0
0 1208.740970184
0
50
0
0
0
0
0
1446.9
2605.14
3695.27
4733.32
5023.34
5212.49
3932.94
714.1287700173 1914.592665662 2785.837324313 3838.101655479 4454.903762381 4625.640782516
3932.94

Dec
0.00
25
718

-25
-25
3907.94

0
50
0

Jan

Feb

Mar

Apr

Operating Activities
Net income
Depreciation
Less: Increase (Decrease) in A/R
Less: Increase (Decrease) in Inventory
Add: Increase (Decrease) in A/P
Add: Increase (Decrease) in Accrued Taxes

-375

-514

-560

-584

25

25

25

25

-2,704

-1,710

-202

-76

-516

-24

-12

-45

-68

-214

-200

1,792

1,153

-571

-695

-25

-25

-25

-25

Cash flow from operating and investing

1,767

1,128

-596

-720

Cash available before financing activities

1,767

2,139

1,854

1,548

Cash flow from operations

Investing Activities
Less: capital expenditures

Financing Activities
Less: bank note repayment

826

Less: debt repayment

Add: bank note issuance

-826

941

1,128

-596

-720

Cash flow from financing

Total Cash Flow

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec

-727

-715

-585

-478

1,125

828

2,940

554

25

25

25

25

25

25

25

25

-176

-139

151

252

1,814

1,386

1,928

718

-71

65

53

802

-149

1,057

-719

-105

-223

-80

-61

99

167

536

165

-701

-768

-725

-713

237

-515

2,630

-693

-25

-25

-25

-25

-25

-25

-25

-25

-726

-793

-750

-738

212

-540

2,605

-718

1,251

981

696

387

958

-281

2,605

-718

706

50

50

281

768

-50

281

-706

718

-726

-843

-750

-738

212

-258

1,899

Actual Dec 31,

2011
Cash

Jan

Feb

Mar

1,511

5,245

2,541

832

630

554

1,227

1,227

1,227

1,227

1,227

Current assets

6,972

5,280

5,009

4,625

4,259

Net PP&E

2,988

2,988

2,988

2,988

2,988

9,960

8,268

7,997

7,613

7,247

Accounts payablee

966

450

450

450

450

Notes payable, bank

826

Accrued taxes

139

-55

-319

-747

-1,167

100

100

100

100

100

2,031

495

231

-197

-617

1,000

1,000

1,000

1,000

1,000

Total liabilities

3,031

1,495

1,231

803

383

Shareholders' equity

6,929

6,554

6,040

5,480

4,896

Total liabilities and equity

9,960

8,049

7,270

6,283

5,279

139

-55

-319

-747

-193

-265

-288

-301

-139

-120

-55

-319

-747

-1,167

Accounts receivable

Inventoryc
d

Total assets

Long-term debt, current portion

Current Liabilities
Long-term debt

2,950

Apr

500

2,768

2,477

Accrued Taxes
Beg. accrued taxes
Accrual of monthly taxes
Tax payments
End. accrued taxes

139

Assumed maintenance of minimum $500,000 balance.

Assumed 60-day collection period for wholesale sales and instant collection for retail sales.

Assumed inventories maintained at December 31, 2011 level for all of 2012.

Assumed equipment purchases equal to depreciation.

Assumed equal to 50% of the current month's COGS for seasonal production; and was related to material purchases that accounts for 50% of COGS fo
fproduction and sales pattern.
Taxes payble on 2011 income are due March 15, 2012. On April 15, June 15, September 15, and December 15, 2012, payments of 25% of each of the
$480,000. This implies a payment of $120,000 in April, June, September and December.
d
e

To be repaid at the at rate of $50,000 each June and December

May

Jun

2,274

Jul
1,946

Aug
1,625

Sep

Oct

Nov

Dec

1,246

758

500

500

500

378

239

391

643

2,457

3,843

5,771

6,489

1,227

1,227

1,227

1,227

1,227

1,227

1,227

1,227

3,879

3,413

3,243

3,116

4,442

5,570

7,498

8,216

2,988

2,988

2,988

2,988

2,988

2,988

2,988

2,988

6,867

6,401

6,231

6,104

7,430

8,558

10,486

11,204

450

450

450

450

450

450

450

450

-1,542

-2,030

-2,331

-2,578

-2,118

-1,691

-177

478

100

100

100

100

100

100

100

100

-992

-1,480

-1,781

-2,028

-1,568

-1,141

373

1,028

1,000

950

950

950

950

950

950

900

-530

-831

-1,078

-618

-191

1,323

1,928

4,169

3,454

2,869

2,391

3,517

4,345

7,284

8,789

4,177

2,924

2,038

1,314

2,899

4,153

8,607

10,716

-1,167

-1,542

-2,030

-2,331

-2,578

-2,118

-1,691

-177

-374

-368

-301

-246

580

426

1,514

775

-120

-120

-120

-1,542

-2,030

-2,331

-2,578

-2,118

-1,691

-177

478

es that accounts for 50% of COGS for 2012. This represents a 30-day payment period. Since inventories are level, purchases will follow seasonal

12, payments of 25% of each of the estimated tax for 2012 are due. In estimating its tax liability for 2012, the company uses a tax liability of

remain same
need to build up with the production
no capex expenditure. Therefore

changes and is consistent (50% of production value per month i.e 900)
changes
no change
488
profits are different (therefore changes)

Month
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec

Fixed goods production

Month
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec

OB

Sales
900
900
900
900
900
900
900
900
900
900
900
900

COGS
702
486
414
378
162
180
378
540
2970
2520
5724
3546

421.2
291.6
248.4
226.8
97.2
108
226.8
324
1782
1512
3434.4
2127.6

Taxes payable Taxes paid

139
-34
0
105 -63.143708888
0
42 -73.784861616
-139
-170.78 -224.67728073
-120
-515.46 -113.01943186
0
-628.48
-113.84
-120
-862.33
-90.35
0
-952.67
-71.42
0
-1024.09
259.21
-120
-884.88
198.85
0
-686.03
639.77
0
-46.26
0.00
-120

Inventory
FG change

FG beginning
478.8
608.4
651.6
673.2
802.8
792
673.2
576
-882
-612
-2534.4
-1227.6

FG end of the month

1,227
1,706
2,314
2,966
3,639
4,442
5,234
5,907
6,483
5,601
4,989
2,455

1,706
2,314
2,966
3,639
4,442
5,234
5,907
6,483
5,601
4,989
2,455
1,227
46,962

Accrued tax
Accrued tax(end)

change
105
42
-170.78
-515.46
-628.48
-862.33
-952.67
-1024.09
-884.88
-686.03
-46.26

34
63
212.7848616163
344.6772807261
113.0194318566
233.844042734
90.3472179176
71.4194910533
-139.2114975295
-198.8477064237
-639.7747808208
-46.2583411299

% of inventory level
Additional storage costs
Operating expenses
3.6%
10896.92
370.90
4.9%
14783.46
374.78
6.3%
18945.97
378.95
7.7%
23246.46
383.25
9.5%
28374.85
388.37
11.1%
33434.25
393.43
12.6%
37734.74
397.73
13.8%
41414.31
401.41
11.9%
35779.98
395.78
10.6%
31870.44
391.87
5.2%
15680.35
375.68
2.6%
7838.28
367.84

802.8
792
673.2
576
-882
-612
-2534.4
-1227.6

total sales
COGS
Per month(production value)
addl storage costs

Income statement
NS
COGS
GP
OPE
Int expenses
addl interest
Int income
PBT
Tax
PAT

18000
10800
900
300 (year)

Jan

Feb
702
486
421
291.6
281
194.4
371
374.78
11
7
0
0
1
2
-100
-185.72
-34 -63.14371
-66
-122.57

4441.81
5233.81
5907.01
6483.01
5601.01
4989.01
2454.61
1227.01

Balance sheet
Cash
Accounts receivable
Inventory
Current assets
Net PP&Ed
Total assets
Accounts payablee
Notes payable, bank
Accrued taxesf
Long-term debt, current portion
Current Liabilities
Long-term debtg
Total liabilities
Shareholders' equity
Total liabilities and equity
Extra

Income statement
NS
COGS
GP
OPE
Int expenses
addl interest
Int income
PBT
Tax
PAT

Jan

dec

jan

Feb
702
486
421
291.6
281
194.4
371
374.78
11
7
0
0
1 2.13666667
-100
-185.72
-34 -63.1437089
-66
-122.57

feb

500
5245.041513348
1227.0059685
6972.047481848
2988
9960.047481848

1282
2541
1706
5529
2988
8517

2199
832
2314
5345
2988
8333

966.3899007906
825.8486371586
138.6595305444
100
2030.8980684936
1000
3030.8980684936
6929.1494133544
9960.047481848

450
0
105
100
655
1000
1655
6863
8517

450
0
42
100
592.00
1000
1592
6740
8332

Mar

Apr

414
248.4
165.6
378.95
7
0
3.7
-217.01
-73.7848616
-143.23

mar

May
378
651.6
-273.6
383.25
7.00
0
3.0
-660.82
-224.6772807261
-436.14

April

jun
162

180

97.2
64.8
388.37
7
5.5766
3.7
-332.41
-113.0194318566
-219.39

108
72
393.43
7
7.2345
0.8
-334.84
-113.844042734
-220.99

May

June

1819
630
2966
5415
2988
8403

2245
554
3639
6437.81
2988
9425.81

500
378.0
4441.81
5319.81
2988
8307.81

500
239.4
5233.81
5973.21
2988
8961.21

450
0
-171
100
379
1000
1379
6597
7976

450
1115.32
-515.46
100
1150
1000
2150
6160.63
8310.49

450
1446.9
-628.48
100
1368
1000
2368
5941.24
8309.66

450
2605.14
-862.33
100
2293
950
3243
5720.25
8963.06

-1115.32

1.85

1.86
1.86
2603.28

jul

aug

sep

378

540

oct
2,970

nov
2,520

5,724

226.8
324
1782
1512
3434.4
151.2
216
1188
1008
2289.6
397.73
401.41
395.78
391.87
375.68
7
7
7
7
7
13.0257
18.47635
23.6666
25.1167
26.06245
0.8
0.8
0.8
0.8
0.8
-265.73
-210.06
762.39
584.85
1881.69
-90.34721792 -71.41949105 259.21149753 198.84770642 639.77478082
-175.38
-138.64
503.18
386.00
1241.92

July

August
500.00
390.6
5907.01
6797.61
2988
9785.61

September
October
November
500.00
500.00
500.00
4432.94
642.6
2457.0
3843.0
5770.8
6483.01
5601.01
4989.01
2454.61
7625.61
8558.01
9332.01
12658.35
2988
2988
2988
2988
10613.61
11546.01
12320.01
15646.35

450
3695.27
-952.67
100
3293
950
4243
5544.87
9787.47

450
4733.32
-1024.09
100
4259
950
5209
5406.23
10615.46

450
5023.34
-884.88
100
4688
950
5638
5909.41
11547.87

450
450
5212.49
3932.94
-686.033122 -46.25834113
100
100
5076
4437
950
950
6026
5387
6295.41
7537.32
12321.86
12924.00

1.86

1.85

1.86

-2722.34

3693.41

4731.47
1.85

5021.48
1.86

1.86

dec
3,546

2127.6
1418.4
367.84
7

December
6489.0
1227.01
7716.01
2988
10704.01
450
0
100
550
900
1450
7537.32
8987.32