Question

The marketing department of Jessi Corporation has submitted the following sales forecast for the upcoming fiscal year (all sales are on account): Ist Quarter 2nd Quarter 3rd Quarter 4th Quarter 11,000 12,000 14,000 13,000 Budgeted unit sales 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 1650 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. 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

Ans. 1	JESSI CORPORATION
	Sales Budget
	Particulars	1st quarter	2nd quarter	3rd quarter	4th quarter
	Budgeted unit sales	11000	12000	14000	13000
	(*) Selling price per unit	$18	$18	$18	$18
	Total sales	$198,000	$216,000	$252,000	$234,000
Ans. 1	Shedule of Expected Cash Collections
	Particulars	1st quarter	2nd quarter	3rd quarter	4th quarter
	Accounts receivable balance	$70,200
	1st quarter	$128,700	$59,400
	2nd quarter		$140,400	$64,800
	3rd quarter			$163,800	$75,600
	4th quarter				$152,100
	Total cash collections	$198,900	$199,800	$228,600	$227,700
	*Calculations:
	Particulars	1st quarter	2nd quarter	3rd quarter	4th quarter
	Accounts receivable balance	given
	1st quarter	$198,000*65%	$198,000*30%
	2nd quarter		$216,000*65%	$216,000*30%
	3rd quarter			$252,000*65%	$252,000*30%
	4th quarter				$234,000*65%
	*30% of fourth quarter's sales would be collected in the first quarter of next year.
Ans. 3	JESSI CORPORATION
	Production Budget
	For the Year Ended December 31
		First quarter	Second quarter	Third quarter	Fourth quarter	Total
	Sales	11000	12000	14000	13000
	Add: Desired Ending inventory	1800	2100	1950	1850
	Total needs	12,800	14,100	15,950	14,850
	Less: Beginning inventory	-1650	-1800	-2100	-1950
	Units to be produced	11,150	12,300	13,850	12,900	50,200
	*Ending inventory of fourth quarter = 20% of first quarter's sales of 2018.
*Calculations for Ending inventory:					*Calculations for Beginning inventory:
Quarter				Quarter
1	12,000 * 15%	1800		1	(calculated as follows)	1650
2	14,000 * 15%	2100		2	Ending inventory of Q1	1800
3	13,000 * 15%	1950		3	Ending inventory of Q2	2100
4	(given)	1850		4	Ending inventory of Q3	1950
	Quarter 1 beginning inventory = Ending inventory of quarter 4 of previous year = 15% of first quarter of current year's sales
		11,000 * 15%
		1650