Reference no: EM132032588

Veronica’s Video Sales Store has forecasted the following monthly sales:

January            $95,000

February          88,000

March             20,000

April                20,000

May                 15,000

June                 30,000

July                  40,000

August             40,000

September      50,000

October           80,000

November     100,000

December      118,000

Total             $696,000           

Veronica’s Video Sales sells the popular Capture and Kill video game cartridge. 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 is for cash and 70 percent is on account. All accounts receivable are collected in the month after the sale is made.

Construct a monthly production and inventory schedule in units. Beginning inventory in January is 20,000 units. (Note: To do part a, you should work in terms of units of production and units of sales. Use a formal heading for the schedule.)

Prepare a monthly schedule of cash receipts. Sales in the December before the planning year were $100,000. Work part b using dollars. Use a formal heading for the schedule.

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 $40,000 per month. Use a formal heading for the schedule.

Prepare a monthly cash budget for January through December using the cash receipt schedule from part b and the cash payments schedule from part c. The beginning cash balance is $5,000, which is the minimum desired. Use a formal heading for the schedule.