Bombs Away Video Games Corporation has forecasted the following monthly sales: B
ID: 2339231 • Letter: B
Question
Bombs Away Video Games Corporation has forecasted the following monthly sales:
Bombs Away Video Games sells the popular Strafe and Capture video game. It sells for $5 per unit and costs $2 per unit to produce. A level production policy is followed. Each month's production is equal to annual sales (in units) divided by 12.
Of each month's sales, 30 percent are for cash and 70 percent are on account. All accounts receivable are collected in the month after the sale is made.
a. Construct a monthly production and inventory schedule in units. Beginning inventory in January is 43,000 units.
b. Prepare a monthly schedule of cash receipts. Sales in December before the planning year are $100,000.
c. Prepare a cash payments schedule for January through December. The production costs of $2 per unit are paid for in the month in which they occur. Other cash payments, besides those for production costs, are $63,000 per month.
d. Prepare a monthly cash budget for January through December using the cash receipts schedule from part b and the cash payments schedule from part c. The beginning cash balance is $5,000, which is also the minimum desired. (Negative amounts should be indicated by a minus sign.)
January $ 118,000 July $ 63,000 February 111,000 August 63,000 March 43,000 September 73,000 April 43,000 October 103,000 May 38,000 November 123,000 June 53,000 December 141,000 Total annual sales = $972,000Explanation / Answer
January feburary March April May June July August September October Nov December 118000 110000 43000 43000 38000 53000 63000 63000 73000 103000 123000 141000 Sales 590000 550000 215000 215000 190000 265000 315000 315000 365000 515000 615000 705000 Cash Receipt Cash Sales 177000 165000 64500 64500 57000 79500 94500 94500 109500 154500 184500 211500 Prior month Credit Sales 70000 413000 385000 150500 150500 133000 185500 220500 220500 255500 360500 430500 Total Cash Receipt 247000 578000 449500 215000 207500 212500 280000 315000 330000 410000 545000 642000 Cash Payment Schedule January feburary March April May June July August September October Nov December Production 81000 81000 81000 81000 81000 81000 81000 81000 81000 81000 81000 81000 Production Cost 162000 162000 162000 162000 162000 162000 162000 162000 162000 162000 162000 162000 Other Payment 63000 63000 63000 63000 63000 63000 63000 63000 63000 63000 63000 63000 Total Cash Payment 225000 225000 225000 225000 225000 225000 225000 225000 225000 225000 225000 225000 January feburary March April May June July August September October Nov December Begining Cash 5000 27000 380000 604500 594500 577000 564500 619500 709500 814500 999500 1319500 Net Cash Flow 22000 353000 224500 -10000 -17500 -12500 55000 90000 105000 185000 320000 417000 Cumlative cash balance 27000 380000 604500 594500 577000 564500 619500 709500 814500 999500 1319500 1736500 Ending cash Balance 27000 380000 604500 594500 577000 564500 619500 709500 814500 999500 1319500 1736500 Cumlative Loan Begining Inventory Production Annual Sale /12 sales Ending Inventory January 43000 81,000 118000 6000 feburary 6000 81,000 110000 -23000 March -23000 81,000 43000 15000 April 15000 81,000 43000 53000 May 53000 81,000 38000 96000 June 96000 81,000 53000 124000 July 124000 81,000 63000 142000 August 142000 81,000 63000 160000 September 160000 81,000 73000 168000 October 168000 81,000 103000 146000 Nov 146000 81,000 123000 104000 December 104000 81,000 141000 44000