Bombs Away Video Games Corporation has forecasted the following monthly sales: B
ID: 2818200 • 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 28,000 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 $48,000 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.)
Explanation / Answer
A Total Annual Sales 792,000.00 Sale price per unit 5.00 Sales in units 158,400.00 Monthly production Annual sales in units/12 13,200.00 Inventory Schedule in Units Month Opening Inventory Production Sales Sales in units Closing Stock January 28,000.00 13,200.00 103,000.00 20,600.00 20,600.00 February 20,600.00 13,200.00 96,000.00 19,200.00 14,600.00 March 14,600.00 13,200.00 28,000.00 5,600.00 22,200.00 April 22,200.00 13,200.00 28,000.00 5,600.00 29,800.00 May 29,800.00 13,200.00 23,000.00 4,600.00 38,400.00 June 38,400.00 13,200.00 38,000.00 7,600.00 44,000.00 July 44,000.00 13,200.00 48,000.00 9,600.00 47,600.00 August 47,600.00 13,200.00 48,000.00 9,600.00 51,200.00 September 51,200.00 13,200.00 58,000.00 11,600.00 52,800.00 October 52,800.00 13,200.00 88,000.00 17,600.00 48,400.00 November 48,400.00 13,200.00 108,000.00 21,600.00 40,000.00 December 40,000.00 13,200.00 126,000.00 25,200.00 28,000.00 B Monthly schedule for cash receipts Month Sales Cash Sales Cash collection Total cash receipts January 103,000.00 30,900.00 70,000.00 100,900.00 February 96,000.00 28,800.00 72,100.00 100,900.00 March 28,000.00 8,400.00 67,200.00 75,600.00 April 28,000.00 8,400.00 19,600.00 28,000.00 May 23,000.00 6,900.00 19,600.00 26,500.00 June 38,000.00 11,400.00 16,100.00 27,500.00 July 48,000.00 14,400.00 26,600.00 41,000.00 August 48,000.00 14,400.00 33,600.00 48,000.00 September 58,000.00 17,400.00 33,600.00 51,000.00 October 88,000.00 26,400.00 40,600.00 67,000.00 November 108,000.00 32,400.00 61,600.00 94,000.00 December 126,000.00 37,800.00 75,600.00 113,400.00 C Monthly schedule for cash payments Month Production Units Prodution Cost Other Cash Payments Total Cash Payments January 13,200.00 26,400.00 48,000.00 74,400.00 February 13,200.00 26,400.00 48,000.00 74,400.00 March 13,200.00 26,400.00 48,000.00 74,400.00 April 13,200.00 26,400.00 48,000.00 74,400.00 May 13,200.00 26,400.00 48,000.00 74,400.00 June 13,200.00 26,400.00 48,000.00 74,400.00 July 13,200.00 26,400.00 48,000.00 74,400.00 August 13,200.00 26,400.00 48,000.00 74,400.00 September 13,200.00 26,400.00 48,000.00 74,400.00 October 13,200.00 26,400.00 48,000.00 74,400.00 November 13,200.00 26,400.00 48,000.00 74,400.00 December 13,200.00 26,400.00 48,000.00 74,400.00 D Cash Budget from January to December Month Opening cash Cash Receipts Cash Payments Closing Balance January 5,000.00 100,900.00 74,400.00 31,500.00 February 31,500.00 100,900.00 74,400.00 58,000.00 March 58,000.00 75,600.00 74,400.00 59,200.00 April 59,200.00 28,000.00 74,400.00 12,800.00 May 12,800.00 26,500.00 74,400.00 -35100.00 June -35100.00 27,500.00 74,400.00 -82000.00 July -82000.00 41,000.00 74,400.00 -115400.00 August -115400.00 48,000.00 74,400.00 -141800.00 September -141800.00 51,000.00 74,400.00 -165200.00 October -165200.00 67,000.00 74,400.00 -172600.00 November -172600.00 94,000.00 74,400.00 -153000.00 December -153000.00 113,400.00 74,400.00 -114000.00