Reference no: EM132637566

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

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 = $972,000

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.

Question 1: Construct a monthly production and inventory schedule in units. Beginning inventory in January is 40,000 units.

Question 2: Prepare a monthly schedule of cash receipts. Sales in December before the planning year are $100,000.

Question 3: 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 $60,000 per month.

Question 4: 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.