Question

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

January	$	112,000	July	$	57,000
February		105,000	August		57,000
March		37,000	September		67,000
April		37,000	October		97,000
May		32,000	November		117,000
June		47,000	December		135,000
Total annual sales = $900,000

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 37,000 units.

Bombs Away Video Games Corporation Production and Inventory Schedule in Units Beginning Inventory + Production – Sales = Ending Inventory January 37,000 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.

	Bombs Away Video Games Corporation Cash Receipts Schedule January February March April May June Sales Cash receipts: Cash sales Prior month's credit sales Total cash receipts $0 $0 $0 $0 $0 $0

	Bombs Away Video Games Corporation Cash Receipts Schedule July August September October November December Sales Cash receipts: Cash sales Prior month's credit sales Total cash receipts

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 $57,000 per month.

	Bombs Away Video Games Corporation Cash Payments Schedule January February March April May June Production cost Other cash payments Total cash payments

	Bombs Away Video Games Corporation Cash Payments Schedule July August September October November December Production cost Other cash payments Total cash payments

  

Answer 1