The marketing department of Jessi Corporation has submitted the following sales
ID: 2404102 • 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):
The selling price of the company’s product is $12 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 $70,800.
The company expects to start the first quarter with 1,695 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 1,895 units.
Required:
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.
1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Budgeted unit sales 11,300 12,300 14,300 13,300Explanation / Answer
1) Calculation of the estimated sales for each quarter of the fiscal year and for the year as a whole: 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Year Budgeted unit sales 11,300 12,300 14,300 13,300 51200 Selling price per unit $ 12 $ 12 $ 12 $ 12 Total Sales $ 1,35,600 $ 1,47,600 $ 1,71,600 $ 1,59,600 $ 6,14,400 2) Calculation of the expected cash collections for each quarter of the fiscal year and for the year as a whole: 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Year Collection of credit sales: Beginning accounts receivable $ 70,800 $ 70,800 1st Quarter's sales $ 1,01,700 $ 27,120 $ 1,28,820 2nd Quarter's sales $ 1,10,700 $ 29,520 $ 1,40,220 3rd Quarter's sales $ 1,28,700 $ 34,320 $ 1,63,020 4th Quarter's sales $ 1,19,700 $ 1,19,700 Total $ 1,72,500 $ 1,37,820 $ 1,58,220 $ 1,54,020 $ 6,22,560 3) Calculation of the required production in units of finished goods for each quarter of the fiscal year and for the year as a whole: 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Year Budgeted unit sales 11,300 12,300 14,300 13,300 51,200 add: Ending inventory 1,845 2,145 1,995 1,895 less:Beginning inventory 1,695 1,845 2,145 1,995 Required production 11,450 12,600 14,150 13,200 51,400 Working: 1st Quarter 2nd Quarter 3rd Quarter Sales of Next Quarter 12,300 14,300 13,300 Ending Inventory @ 15% 1,845 2,145 1,995
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