The marketing department of Jessi Corporation has submitted the following sales
ID: 2355128 • Letter: T
Question
The marketing department of Jessi Corporation has submitted the following sales forecast for the upcoming fiscal year (all sales are on account):1st Quarter
2nd Quarter
3rd Quarter
4th Quarter
Units to be produced
11,000
12,000
14,000
13,000
The selling price of the company's product is $18.00 per unit. Management expects to collect 65% of sales in the quarter in which the sales are made, 30% in the following quarter, and 5% of sales are expected to be "'uncollectible. The beginning balance of accounts receivable, all of which is expected to be collected in the first quarter, is $70,200. The company expects to start the first quarter with 1,650 units in finished goods inventory. Management desires an ending finished goods inventory in each quarter equal to 15% of the next quarter's budgeted sales. The desired ending finished goods inventory for the fourth quarter is 1,850 units.
Prepare the company's sales budget and schedule of expected cash collections.
Prepare the company's production budget for the upcoming fiscal year.
Explanation / Answer
a)
Quarter
1
2
3
4
Total
Budgeted Unit Sales
11,000
12,000
14,000
13,000
50,000
Selling Price per Unit
× $18
× $18
× $18
× $18
× $18
Total Sales
$198,000
$216,000
$252,000
$234,000
$900,000
b)
Quarter
1
2
3
4
Total
Accounts Receivable, Beginning
$70,200
$70,200
Quarter 1 Sales
$128,700
$59,400
$188,100
Quarter 2 Sales
$140,400
$64,800
$205,200
Quarter 3 Sales
$163,800
$75,600
$239,400
Quarter 4 Sales
$152,100
$152,100
Total Cash Collections
$198,900
$199,800
$228,600
$227,700
$855,000
Remember that collections in the quarter of sales is 65%, therefore for the first quarter $198,000 × 65% = $128,700, in the quarter following the sale, collections are expected to be 30%, therefore $198,000 × 30% = $59,400. The rest of the calculations are done the same way
a)
Quarter
1
2
3
4
Total
Budgeted Unit Sales
11,000
12,000
14,000
13,000
50,000
Selling Price per Unit
× $18
× $18
× $18
× $18
× $18
Total Sales
$198,000
$216,000
$252,000
$234,000
$900,000
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