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 11,300 2nd Quarter 12,300 3rd Quarter 14,300 Budgeted unit sales 4th Quarter 13,300 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.

Answer 1

1 Estimated sales (units) Sale price per unit Estimated sales $ 1st quarter 2nd Quarter 3rd Quarter 4th Quarter Total 11300 12300 14300 13300 51200 12 12 12 135600 147600 171600 159600 614400 2. Estimation of Cash Collection 1st quarter 2nd Quarter 3rd Quarter 4th Quarter Total 101700 110700 128700 119700 460800 Cash collection of current qtr sales (current qtr sales *75%) Cash collection of previous qtr sales (previous qtr sales*20%) Total 70800 172500 27120 137820 29520 158220 34320 154020 161760 622560

3 Computation of required production 1st quarter 2nd Quarter 3rd Quarter 4th Quarter Total 1845 2145 1995 1695 11300 12300 14300 13300 51200 1695 Opening units Sales Closing Units (15% *next qtr unit sales) Production (Sales +Closing- Opening) 1845 2145 1995 1895 1895 11450 12600 14150 1 3200 51400