Question

Exercise 8-14 (Algo) Sales and Production Budgets (LO8-2, LO8-3) The marketing department of Jessi Corporation has submitted the following sales forecast for the upcoming fiscal year (all sales are on account) 2nd Quarter 3rd Quarter 1st Quarter 12,400 4th Quarter 14.40 Budgeted unit sales The selling price of the company's product is $23 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 $73,000. The company expects to start the first quarter with 2.480 units in finished goods inventory Management desires an ending finished goods inventory in each quarter equal to 20% of the next quarter's budgeted sales. The desired ending finished goods inventory for the fourth quarter is 2,680 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. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required Calculate 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

Answer 1

SOLUTION

1. Sales budget

	1st Quarter	2nd Quarter	3rd Quarter	4th Quarter	Year
Budgeted unit sales (A)	12,400	13,400	15,400	14,400	55,600
Selling price per unit (B)	$23	$23	$23	$23	$23
Total sales (A*B)	285,200	308,200	354,200	331,200	1,278,800

2. Schedule of expected cash collection

	1st Quarter	2nd Quarter	3rd Quarter	4th Quarter	Year
Beginning accounts receivable	73,000				73,000
Quarter 1 sales (285,200*65%), (285,200*30%)	185,380	85,560			270,940
Quarter 2 sales (308,200*65%), (308,200*30%)		200,330	92,460		292,790
Quarter 3 sales (354,200*65%), (354,200*30%)			230,230	106,260	336,490
Quarter 4 sales (331,200*65%)				215,280	215,280
Total cash collection	258,380	285,890	322,690	321,540	1,188,500

3. Production budget

	1st Quarter	2nd Quarter	3rd Quarter	4th Quarter	Year
Budgeted unit sales	12,400	13,400	15,400	14,400	55,600
Add: Desired ending inventory (13,400*20%),(15,400*20%), (14,400*20%)	2,680	3,080	2,880	2,680	2,680
Total needs	15,080	16,480	18,280	17,080	58,280
Less: Beginning inventory	(2,480)	(2,680)	(3,080)	(2,880)	(2,480)
Required production in units	12,600	13,800	15,200	14,200	55,800