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
Budgeted unit sales	11,900	12,900	14,900	13,900

The selling price of the company’s product is $18 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 $72,000.

The company expects to start the first quarter with 1,785 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 1,985 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

ANSWER

1.

SALES BUDGET

	1st quarter	2nd quarter	3nd quarter	4th quarter	Year
Sales in units	11,900	12,900	14,900	13,900	53,600
Selling price per unit	18	18	18	18	18
Sales	214,200	232,200	268,200	250,200	964,800

2.

CASH RECEIPTS BUDGET

	1st quarter	2nd quarter	3nd quarter	4th quarter	Year
Cash collected from sales made in the quarter	160,650 (214,200*75%)	174,150 (232,200*75%)	201,150 (268,200*75%)	187,650 (250,200*75%)	723,600
Cash collected from sales made in the previous quarter	72,000	42,840 (214,200*20%)	46,440 (232,200*20%)	53,640 (268,200*20%)	214,920
Cash collections	232,650	216,990	247,590	241,290	938,520

3.

	1st quarter	2nd quarter	3nd quarter	4th quarter	Year
Sales	11,900	12,900	14,900	13,900	53,600
Ending inventory	1,935 (12,900*15%)	2,235 (14,900*15%)	2,085 (13,900*15%)	1,985	1,985
Beginning inventory	(1,785)	(1,935)	(2,235)	(2,085)	(1,785)
Required production in units	12,050	13,200	14,750	13,800	53,800

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