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) 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter 13,500 Budgeted unit sales 11,500 12,500 14,500 The selling price of the company's product is $14 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 $71,200. The company expects to start the first quarter with 1,725 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 1,925 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.

Explanation / Answer

1) Budgeted sales 1st qtr 2nd qtr 3rd qtr 4th qtr total Budgeted sales 11,500 12,500 14,500 13,500 52,000 Budgeted selling price per unit 14 14 14 14 14 total sales 161000 175000 203000 189000 728000 2) Expected cash collection 1st qtr 2nd qtr 3rd qtr 4th qtr total Account receivable 71,200 71,200 1st qtr sales(161,000*75%;20%) 120750 32200 152950 2nd qtr sales(175000*75%;20%) 131250 35000 166250 3 rd qtr sales(203000*75%;20%) 152250 40600 192850 4 th qtr sales (189000*75%;20%) 141750 37800 179550 total cash collection 191,950 163450 329000 78400 762,800 3) production budget 1st qtr 2nd qtr 3rd qtr 4th qtr total Expected unit sales 11,500 12,500 14,500 13,500 52,000 Add:Ending inventory 15% 1875 2175 2025 1,925 1,925 total needs 13,375 14,675 16,525 15,425 53,925 less:opening inventory -1,725 -1,875 -2,175 -2,025 -1,725 production required 11,650 12,800 14,350 13,400 52,200

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