The marketing department of Jessi Corporation has submitted the following sales

Question

The marketing department of Jessi Corporation has submitted the following sales forecast for the upcoming fiscal year (all sales are on account):

The selling price of the company’s product is $16 per unit. Management expects to collect 75% of sales in the quarter in which the sales are made, 20% 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 $71,600.

The company expects to start the first quarter with 1,755 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 1,955 units.

Required: (SHOW ALL WORK)

1. Calculate the estimated sales for each quarter of the fiscal year and for the year as a whole.

2. Calculate the expected cash collections for each quarter of the fiscal year and for the year as a whole.

3. Calculate the required production in units of finished goods for each quarter of the fiscal year and for the year as a whole.

Explanation / Answer

1. Calculation of estimated sales for each quarter of fiscal year and for the year as a whole S.No Particulars 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Total (Whole Year) (a) Budgeted unit sales 11700 12700 14700 13700 52800 (b) Selling price per unit 16 16 16 16 16 (c ) Estimated Sales [(a)*(b)] 187200 203200 235200 219200 844800 2. Calculate the expected cash collections for each quarter of the fiscal year and for the year as a whole. S.No Particulars 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Total (Whole Year) (a) Budgeted unit sales 11700 12700 14700 13700 52800 (b) Selling price per unit 16 16 16 16 16 (c ) Estimated Sales [(a)*(b)] 187200 203200 235200 219200 844800 (d) The beginning balance of accounts receivable 71600 (e ) Collection from 1st quarter sales 140400 37440 (187200*75%) (187200*20%) (f) Collection from 2nd quarter sales 152400 40640 (203200*75%) (203200*20%) (g) Collection from 3rd quarter sales 176400 47040 (235200*75%) (235200*20%) (h) Collection from 4th quarter sales 164400 (219200*75%) (i) Expected cash collection each quarter 212000 189840 217040 211440 (71600+140400) (37440+152400) (40640+176400) (47040+164400) (j) Expected cash collection for whole year 830320 (212000+189840+217040+211440) 3. Calculate the required production in units of finished goods for each quarter of the fiscal year and for the year as a whole. S.No Particulars 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Total (Whole Year) (a) Sales 11700 12700 14700 13700 52800 (b) Add: Desired ending finished inventory 1905 2205 2055 1955 1955 (c ) Less: Beginning finished inventory 1755 1905 2205 2055 1755 (d) Required production in units [(a) + (b) - (c )] 11850 13000 14550 13600 53000

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