1. Prepare a Pro Forma (projected) income statement for Toy World for 1994 assuming they adopt the new level production strategy. Please use the same format as Toy World used for its original 1994 Pro Forma Income Statement that employed their seasonal production strategy. Project the approximate balance sheet balances Toy World would have in their Cash, Accounts Receivable, Inventory and Notes Payable, Bank accounts if they employed the new level production strategy. Do not consider any changes to other balance sheet accounts that may occur as they will all be relatively immaterial (for example, the Accrued Taxes balance would change since Toy Worlds earnings would change, but the amount is relatively small). HINT Accounts Receivable should not change between the 2 options, but will need to be factored in to correctly project the other items (cash, inventory, notes payable).

	FG		FG	FG	FG
Month	Completed	COGS	Net Change	Beg	End
January	$ 542,500	$ 78,000	$ 464,500	$ 586,000	$ 1,050,500
February	$ 542,500	$ 91,000	$ 451,500	$ 1,050,500	$ 1,502,000
March	$ 542,500	$ 104,000	$ 438,500	$ 1,502,000	$ 1,940,500
April	$ 542,500	$ 91,000	$ 451,500	$ 1,940,500	$ 2,392,000
May	$ 542,500	$ 91,000	$ 451,500	$ 2,392,000	$ 2,843,500
June	$ 542,500	$ 91,000	$ 451,500	$ 2,843,500	$ 3,295,000
July
August
September
October
November
December

Cash/Notes Payable Budget
Projected 1994 - Level Production
($000's)
	Jan	Feb	March	April	May	June	July	Aug	Sept	Oct	Nov	Dec
Inflows:
A/R Collection (Sales from 2 months ago)	$ 1,965	$ 940	$ 120	$ 140	$ 160	$ 140
Interest Income	$ 1	$ 2	$ 1	$ 1	$ 1	$ 1
Total	$ 1,966	$ 942	$ 121	$ 141	$ 161	$ 141
Outflows:
Payments of A/P	$ 282	$ 250	$ 250	$ 250	$ 250	$ 250
Operating Expenses (Assumes paid when incurred)*	$ 205	$ 207	$ 209	$ 211	$ 213	$ 215
Wages ($3,510/12)	$ 293	$ 292	$ 293	$ 292	$ 293	$ 292
Interest Expense	$ 7	$ 4	$ 4	$ 7	$ 12	$ 17
Total	$ 787	$ 753	$ 756	$ 760	$ 768	$ 774
Net Inflow/(Outflow)
Beginning Cash	$ 200	$ 627	$ 816	$ 200	$ 200	$ 200
Ending Cash Before Loan Increase/(Repayment)	$ 1,379	$ 816	$ 181	$ (419)	$ (407)	$ (433)
Desired Cash Balance	$ 200	$ 200	$ 200	$ 200	$ 200	$ 200
Loan Increase/(Repayment)	$ (752)	$ -	$ 19	$ 619	$ 607	$ 633
End of Month Loan	$ -	$ -	$ 19	$ 638	$ 1,245	$ 1,878
End of Month Cash	$ 627	$ 816	$ 200	$ 200	$ 200	$ 200
*Additional Inventory/Storage Costs are prorated based on projected inventory balances by month.