Question

The marketing department of Jessi Corporation has submitted the following sales forecast for the upcoming fiscal year (all sales are on 1st Quarter 11,200 Budgeted unit sales 2nd Quarter 3rd Quarter 4th Quarter 12,200 14, 200 13,200 The selling price of the company's product is $11 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 $70,600. The company expects to start the first quarter with 1,680 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 1,880 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

1. Jessi Corporation Sales Budget for the upcoming fiscal year 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Budgeted unit sales 11,200 12,200 14,200 13,200 Selling Price per unit $11 $11 $11 $11 Projected Sales Revenue $123,200 $134,200 $156,200 $145,200 2. 1st quarter 2nd quarter 3rd quarter 4th quarter Year Beginning accounts receivable $70,600 $70,600 1st quarter sales $80,080 $36,960 $117,040 2nd quarter sales $87,230 $40,260 $127,490 3rd quarter sales $101,530 $46,860 $148,390 4th quarter sales $94,380 $94,380 Total cash collections $150,680 $124,190 $141,790 $141,240 $557,900 Remember that collections in the quarter of sales is 65%, therefore for the first quarter $123,200 x 65% - $80,080 In the quarter following the sale, collections are expected to be 30%, therefore $123,200 x 30 % $36,960 The rest of the calculations are done the same way

3. Jessi Corporation Production Budget for the upcoming fiscal year 1st quarter 2nd quarter 3rd quarter 4th quarter Year Budgeted unit sales 11,200 12,200 14,200 13,200 50,800 Add: Desired Ending Inventory 1,830 2,130 1,980 1,880 1,880 Total Units Needed 13,030 14,330 16,180 15,080 52,680 (2,130) Less: Beginning Inventory (1,680) (1,830) (1,980) (1,680) Required Production 11,350 12,500 14,050 13,100 51,000