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.

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 $45,000 per month.

Step by step solution

01

Meaning of cash payments schedule

The cash payments schedule is maintained by an organization to determine the cash payments made by it. This schedule clearly determines the different payments made by the organization and their impact on the cash flows.

02

Cash payments schedule

Month	January	February	March	April	May	June
12,600 units X $2	$25,200	$25,200	$25,200	$25,200	$25,200	$25,200
Other cash payments	$45,000	$45,000	$45,000	$45,000	$45,000	$45,000
Total cash payments	$70,200	$70,200	$70,200	$70,200	$70,200	$70,200

Month	July	August	September	October	November	December
12,600 units X $2	$25,200	$25,200	$25,200	$25,200	$25,200	$25,200
Other cash payments	$45,000	$45,000	$45,000	$45,000	$45,000	$45,000
Total cash payments	$70,200	$70,200	$70,200	$70,200	$70,200	$70,200

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