Veronica’s Video Sales Store has forecasted the following monthly sales:
January $95,000
February 88,000
March 20,000
April 20,000
May 15,000
June 30,000
July 40,000
August 40,000
September 50,000
October 80,000
November 100,000
December 118,000
Total $696,000
Veronica’s Video Sales sells the popular Capture and Kill video game cartridge. 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, 30 percent is for cash and 70 percent is on account. All accounts receivable are collected in the month after the sale is made.
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. Use a formal heading for the schedule.)
Prepare a monthly schedule of cash receipts. Sales in the December before the planning year were $100,000. Work part b using dollars. Use a formal heading for the schedule.
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. Use a formal heading for the schedule.
Prepare a monthly cash budget for January through December using the cash receipt schedule from part b and the cash payments schedule from part c. The beginning cash balance is $5,000, which is the minimum desired. Use a formal heading for the schedule.