Question

Budgeting In-Class Assignment Question 1: The Marketing Department of Jessi Corporation has submitted the following sales forecast for the upcoming fiscal year: 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Budgeted sales (units) 8,000 10,000 12,000 11,000 The selling price of the company's product is $20 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 $80,500. The company expects to start the first quarter with 2000 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 2, 250 units. Required: 1. Prepare the company's sales budget and schedule of expected cash collections. 2. Prepare the company's production budget for the upcoming fiscal year.

Answer 1

1. Sales Budget 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Year Budgeted units sales Selling price Budgeted sales 12,000 41,000 8,000 10,000 11,000 20 $ 20 $ 20 $ 20 $ 20 160,000 $ 200,000 $240,000 $ 220,000 $ 820,000 2. Expected cash collections 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Sales Year Beginning accounts receivable $ 80,500 80,500 $160,000 $ 104,000 $ $ 200,000 $ 240,000 $ 220,000 135,200 (Sales 65%) & (Sales* 30 %) 190,000 (Sales 65%) & (Sales 30%) 228,000 (Sales 65%) & (Sales 30%) 143,000 (Sales 65%) $ 1st Quarter sales 31,200 $ 130,000 $ 2nd Quarter sales 60,000 3rd Quarter sales 72,000 $ $ 143,000 $ 184,500 $ 161,200 216,000 215,000 $ $156,000 $ 4th Quarter sales Total cash collections 776,700 3. Production Budget 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Year Budgeted unit sales Add: Desired ending inventory Total needs 8,000 10,000 12,000 11,000 41,000 2,250 (15% of next quarters budgeted units sales) 1,650 1,500 1,800 2,250 9,500 13,250 11,800 13,650 43,250 Less: Beginning inventory Production Budget (units) 2,000 1,500 1,800 1,650 2,000 11,600 7,500 10,300 11,850 41,250