Question

ront Page Video Games Corporation has forecasted the following monthly sales: January $108,000 July $53,000 February 101,000 August 53,000 March 33,000 September 63,000 April 33,000 October 93,000 May 28,000 November 113,000 June 43,000 December 131,000 Total sales = $852,000 The firm sells its Last Spike video game for $5 per unit, and the cost to produce the game is $2 per unit. 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, 20 percent are for cash and 80 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 33,000 units. (Note: To do part a, you should work in terms of units of production and units of sales.) Front Page Video Games Corporation Production and inventory schedule in units Beginning inventory + Production – Sales = Ending inventory January 33,000 + – = February + – = March + – = April + – = May + – = June + – = July + – = August + – = September + – = October + – = November + – = December + – = b. Prepare a monthly schedule of cash receipts. Sales in the December before the planning year were $100,000. Work part b using dollars. Front Page Video Games Corporation January February March April May June Sales $ $ $ $ $ $ Cash sales Prior month’s sales Total cash receipts $ $ $ $ $ $ Front Page Video Games Corporation July August September October November December Sales $ $ $ $ $ $ Cash sales Prior month’s sales Total cash receipts $ $ $ $ $ $ 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 $53,000 per month. Front Page Video Games Corporation Constant production January February March April May June Production cost $ $ $ $ $ $ Other cash payments Total cash payments $ $ $ $ $ $ Front Page Video Games Corporation Constant production July August September October November December Production cost $ $ $ $ $ $ Other cash payments Total cash payments $ $ $ $ $ $ d. Prepare a monthly cash budget for January through December. The beginning cash balance is $5,000, and that is also the minimum desired. (Do not leave any empty spaces; input a 0 wherever it is required. Negative answers and amounts to be deducted should be indicated by a minus sign.) Front Page Video Games Corporation January February March April May June Net cash flow $ $ $ $ $ $ Beginning cash Cumulative cash balance $ $ $ $ $ $ Monthly loan or (repayment) Cumulative loan Ending cash balance $ $ $ $ $ $ Front Page Video Games Corporation July August September October November December Net cash flow $ $ $ $ $ $ Beginning cash Cumulative cash balance $ $ $ $ $ $ Monthly loan or (repayment) Cumulative loan Ending cash balance $ $ $ $ $ $

Answer 1

Answer a.

Answer b.

Answer c.

Answer d.