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	11,700	12,700	14,700	13,700

The selling price of the company’s product is $16 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 $71,600.

The company expects to start the first quarter with 1,755 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 1,955 units.

Required:

1. a.Calculate the estimated sales for each quarter of the fiscal year and for the year as a whole.

b. Calculate the expected cash collections for each quarter of the fiscal year and for the year as a whole.

c. 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

	1st Quarter	2nd Quarter	3rd Quarter	4th Quarter	Year
Budgeted unit sales	11700	12700	14700	13700	52800
Selling price per unit	16	16	16	16	16
Total sales	187200	203200	235200	219200	844800
Schedule of Expected Cash Collections
	1st Quarter	2nd Quarter	3rd Quarter	4th Quarter	Year
Accounts receivable,	71600	$	$	$	71600
beginning balance
1st Quarter sales	140400	37440			177840
2nd Quarter sales		152400	40640		193040
3rd Quarter sales			176400	47040	223440
4th Quarter sales				164400	164400
Total cash collections	212000	189840	217040	211440	830320
Production Budget
	1st Quarter	2nd Quarter	3rd Quarter	4th Quarter	Year
Budgeted unit sales	11700	12700	14700	13700	52800
Add desired ending inventory	1905	2205	2055	1955	1955
Total units needed	13605	14905	16755	15655	54755
Less beginning inventory	1755	1905	2205	2055	1755
Required production	11850	13000	14550	13600	53000