Question

The marketing department of Jessi Corporation has submitted the following sales forecast for the upcoming fiscal...

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 13,000 14,000 16,000 15,000

The selling price of the company’s product is $29 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 $74,200.

The company expects to start the first quarter with 2,600 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 2,800 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.

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Answer #1

Part 1

Q1 Q2 Q3 Q4 Total
Sales Units 13000 14000 16000 15000 58000
Selling Price 29 29 29 29 29
Total Sales 377000 406000 464000 435000 1682000

Part 2

Q1 Q2 Q3 Q4 Total
AR 74200 74200
Sale of Q1 245050 113100 358150
Sales of Q2 263900 121800 385700
Sales of Q3 301600 139200 440800
Sales of Q4 282750 282750
Total Collection 319250 377000 423400 421950 1541600

Part 3

Q1 Q2 Q3

Q4

Total
Budgeted Unit Sales 13000 14000 16000 15000 58000
Add: Bug. Closing Stock 2800 3200 3000 2800 2800
Less : Opening 2600 2800 3200 3000 2600
Required Production Units 13200 14400 15800 14800 58200
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