Front Page Video Games Corporation has forecasted the following monthly sales: January $ 95,000 July $ 40,000 February 88,000 August 40,000 March 20,000 September 50,000 April 20,000 October 80,000 May 15,000 November 100,000 June 30,000 December 118,000
Front Page Video Games Corporation has
January $ 95,000 July $ 40,000
February 88,000 August 40,000
March 20,000 September 50,000
April 20,000 October 80,000
May 15,000 November 100,000
June 30,000 December 118,000
Total sales = $696,000
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 20,000 units. (Note: To do part a, you should work in terms of units of production and units of sales.) (Enter all values as positive value.)
Front Page Video Games Corporation
Production and inventory schedule in units
Beginning
inventory + Production – Sales = Ending
inventory
January 20,000 + – =
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
Cash Receipts Schedule
January February March April May June
Sales $ $ $ $ $ $
Cash sales
Prior month’s sales
Total cash receipts $ $ $ $ $ $
Front Page Video Games Corporation
Cash Receipts Schedule
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 $40,000 per month.
Front Page Video Games Corporation
Cash Payments Schedule
Constant production
January February March April May June
Production cost $ $ $ $ $ $
Other cash payments
Total cash payments $ $ $ $ $ $
Front Page Video Games Corporation
Cash Payments Schedule
Constant production
July August September October November December
Production cost $ $ $ $ $ $
Other cash payments
Total cash payments $ $ $ $ $ $
d. Prepare a monthly
Front Page Video Games Corporation
Cash Budget
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
Cash Budget
July August September October November December
Net cash flow $ $ $ $ $ $
Beginning cash
Cumulative cash balance $ $ $ $ $ $
Monthly loan or (repayment)
Cumulative loan
Ending cash balance $ $ $ $ $ $
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