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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.

d. Prepare a monthly cash budget for January through December using the cash receipts schedule from part b and the cash payments schedule from part c. The beginning cash balance is \)5,000, which is also the minimum desired.

Short Answer

Expert verified

The budgeted cash for January is $34,800 and December is $5,000.

Step by step solution

01

Meaning of cash budget

The cash budget is prepared to manage the organization’s cash balance. This budget evaluates the cash inflows and outflows of an organization for a specified period.

02

Cash budget

January

February

March

April

May

June

Net cash flow

$29,800

$27,700

$2,400

($45,200)

($46,700)

($45,700)

Beginning cash

$5,000

$34,800

$62,500

$64,900

$19,700

$5,000

Cumulative cash balance

$34,800

$62,500

$64,900

$19,700

($27,000)

($40,700)

Monthly loan (repayment)

$

$0

$0

$0

$32,000

$45,700

Cumulative loan

$0

$0

$0

$0

$32,000

$77,700

Ending cash balance

$34,800

$62,500

$64,900

$19,700

$5,000

$5,000

July

August

September

October

November

December

Net cash flow

($32,200)

($25,200)

($22,200)

($6,200)

$20,800

$40,200

Beginning cash

$5,000

$5,000

$5,000

$5,000

$5,000

$5,000

Cumulative cash balance

($27,200)

($20,200)

($17,200)

($1,200)

$25,800

$45,200

Monthly loan (repayment)

$32,200

$25,200

$22,200

$6,200

($20,800)

($40,200)

Cumulative loan ending cash balance

$109,900

$135,100

$157,300

$163,500

$142,700

$102,500

Ending cash balance

$5,000

$5,000

$5,000

$5,000

$5,000

$5,000








03

Working notes

1. Netcashflow=Totalcashreceipts-Totalcashpayments

2.Cummulativecashbalance=Netcashflows+Beginningcashbalance

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