In: Accounting
Front Page 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 = $756,000 | |||||
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, 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.
(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 | 25,000 | + | – | = | |||
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 $45,000 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 | $ | $ | $ | $ | $ | $ |