Determine a cash payments schedule for january through

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Reference no: EM13485143

Bombs Away Video Games Corporation has forecasted the following monthly sales:

January $ 100,000 July $ 45,000

February 93,000 August 45,000

March 25,000 September 55,000

April 25,000 October 85,000

May 20,000 November 105,000

June 35,000 December 123,000

Total sales = $768,000

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 25,000 units.

BOMBS AWAY VIDEO GAMES CORPORATION

Production and inventory schedule in units

Beginning

inventory + Production - Sales = Ending

inventory

January 25,000 + - =

February + - =

March + - =

April + - =

May + - =

June + - =

July + - =

August + - =

September + - =

October + - =

November + - =

December + - =

(b)Prepare a monthly schedule of cash receipts. Sales in December before the planning year are $100,000.

(c)Determine 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 $45,000 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.

Reference no: EM13485143

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