Front Page Video Games Corporation has forecasted the following monthly sales: January $115, 000 February 108,000 March 40,000 April 40,000 May 35,000 June 50,000 Total sales = $936,000 July August September October November December $60,000 60,000 70,000 100,000 120,000 138,000 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 40,000 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 40,000 15600 23000 Ending inventory 32600 January + = February 32600 + 15600 21600 26600 March 26600 + 15600 8000 34200 1 April 34200 + 15600 8000 41800 - May 41800 + 15600 7000 = 50400 June 50400 + 15600 10000 56000 July 56000 + 15600 12000 59600 - August 59600 + 15600 12000 63200 - September 63200 + 15600 14000 64800 - October 64800 + 15600 20000 60400 - November 60400 + 15600 24000 52000 - December 52000 + 15600 27600 40000 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 anuary February March $ April May June $ $ $ Sales Cash sales Prior month's sales Total cash receipts $ $ $ $ Front Page Video Games Corporation July August September $ $ October December November $ $ $ 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 $60,000 per month. Front Page Video Games Corporation Constant production February March April $ $ January May June $ $ $ Production cost Other cash payments Total cash payments $ $ $ July Front Page Video Games Corporation Constant production 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 O wherever it is required. Negative answers and amounts to be deducted should be indicated by a minus sign.) Front Page Video Games Corporation Tanuary February March $ $ April May June $ $ $ $ Net cash flow Beginning cash $ $ $ Cumulative cash balance Monthly loan or (repayment) Cumulative loan Ending cash balance $ $ July Front Page Video Games Corporation August September October November $ December $ $ $ Net cash flow Beginning cash $ $ $ $ $ $ Cumulative cash balance Monthly loan or (repayment) Cumulative loan Ending cash balance $ $ $ $
