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

January	\(100,000
February	\)93,000
March	\(25,000
April	\)25,000
May	\(20,000
June	\)35,000
July	\(45,000
August	\)45,000
September	\(55,000
October	\)85,000
November	\(105,000
December	\)123,000
Total annual sales	\(756,000

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, 30 percent are for cash and 70 percent are on account. All accounts receivable are collected in the month after the sale is made.

b. Prepare a monthly schedule of cash receipts. Sales in the December before the planning year are \)100,000. Work part b using dollars.

Step by step solution

01

Formula used for calculating the monthly cash receipts

$\mathit{M}\mathit{o}\mathit{n}\mathit{t}\mathit{h}\mathit{l}\mathit{y}\mathbf{}\mathit{s}\mathit{a}\mathit{l}\mathit{e}\mathit{s}\mathbf{=}\mathbf{30}\mathbf{\%}\mathbf{\times }\mathit{P}\mathit{r}\mathit{e}\mathit{s}\mathit{e}\mathit{n}\mathit{t}\mathbf{}\mathit{m}\mathit{o}\mathit{n}\mathit{t}\mathit{h}\mathbf{}\mathit{s}\mathit{a}\mathit{l}\mathit{e}\mathit{s}\mathbf{+}\mathbf{70}\mathbf{\%}\mathbf{\times }\mathit{P}\mathit{r}\mathit{i}\mathit{o}\mathit{r}\mathbf{}\mathit{m}\mathit{o}\mathit{n}\mathit{t}\mathit{h}\mathit{s}\mathbf{}\mathit{s}\mathit{a}\mathit{l}\mathit{e}\mathit{s}$

02

Cash receipts schedule

Month	January	February	March	April	May	June
Sales	$100,000	$93,000	$25,000	$25,000	$20,000	$35,000
30% cash sales	$30,000	$27,900	$7,500	$7,500	$6,000	$10,500
70% prior month sales	$70,000	$70,000	$65,100	$17,500	$17,500	$14,000
Total cash receipts	$100,000	$97,900	$72,600	$25,000	$23,500	$24,500

Month	July	August	September	October	November	December
Sales	$45,000	$45,000	$55,000	$85,000	$105,000	$123,000
30% cash sales	$13,500	$13,500	$16,500	$25,500	$31,500	$36,900
70% prior month sales	$24,500	$31,500	$31,500	$38,500	$59,500	$73,500
Total cash receipts	$38,000	$45,000	$48,000	$64,000	$91,000	$110,400

Unlock Step-by-Step Solutions & Ace Your Exams!

• Full Textbook Solutions

  Get detailed explanations and key concepts

• Unlimited Al creation

  Al flashcards, explanations, exams and more...

• Ads-free access

  To over 500 millions flashcards

• Money-back guarantee

  We refund you if you fail your exam.

Start your free trial

Over 30 million students worldwide already upgrade their learning with Vaia!