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 12,100 13,100 15,100 14,100 Budgeted unit sales The selling price of the company's product is $20 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 $72,400. The company expects to start the first quarter with 2.420 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 2,620 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	Year
	Budgeted unit sales	12100	13100	15100	14100	54400
	(*) Selling price per unit	$20	$20	$20	$20	$20
	Total sales	$242,000	$262,000	$302,000	$282,000	$1,088,000
Ans. 2	Shedule of Expected Cash Collections
	Particulars	1st quarter	2nd quarter	3rd quarter	4th quarter	Year
	Accounts receivable balance	$72,400				$72,400
	1st quarter	$181,500	$48,400			$229,900
	2nd quarter		$196,500	$52,400		$248,900
	3rd quarter			$226,500	$60,400	$286,900
	4th quarter				$211,500	$211,500
	Total cash collections	$253,900	$244,900	$278,900	$271,900	$1,049,600
	*Calculations:
	Particulars	1st quarter	2nd quarter	3rd quarter	4th quarter
	Accounts receivable balance	given
	1st quarter	$242,000*75%	$242,000*20%
	2nd quarter		$262,000*75%	$262,000*20%
	3rd quarter			$302,000*75%	$302,000*20%
	4th quarter				$282,000*75%
	*20% 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	Year
	Sales	12100	13100	15100	14100	$54,400
	Add: Desired Ending inventory	2620	3020	2820	2620	$11,080
	Total needs	14,720	16,120	17,920	16,720	$65,480
	Less: Beginning inventory	-2420	-2620	-3020	-2820	-$10,880
	Units to be produced	12,300	13,500	14,900	13,900	$54,600
	*Ending inventory of fourth quarter = 20% of first quarter's sales of 2018.
*Calculations for Ending inventory:					*Calculations for Beginning inventory:
Quarter				Quarter
1	13,100 * 20%	2620		1	(given)	2420
2	15,100 * 20%	3020		2	Ending inventory of Q1	2620
3	14,100 * 20%	2820		3	Ending inventory of Q2	3020
4	(given)	2620		4	Ending inventory of Q3	2820