Question

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

January	$	120,000	July	$	65000
February		113000	August		65000
March		45000	September		75000
April		45000	October		105000
May		40000	November		125000
June		55000	December		143000
Total annual sales = $996,000

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, 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 45,000 units.

Bombs Away Video Games Corporation
Production and inventory schedule in units
	Beginning inventory	+	Production	–	Sales	=	Ending inventory
January	40,000
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	$		$		$		$		$		$

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	$		$		$		$		$		$

Answer 1