In: Accounting
Exercise 8-14 Sales and Production Budgets [LO8-2, LO8-3]
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 | 12,500 | 13,500 | 15,500 | 14,500 |
The selling price of the company’s product is $24 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 $73,200.
The company expects to start the first quarter with 2,500 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 2,700 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.
Calculate the estimated sales for each quarter of the fiscal year and for the year as a whole.
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Requirement 2
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Requirement 3
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1st Quarter | 2nd Quarter | 3rd Quarter | 4th Quarter | ||
Budgeted unit sales | 12,500 | 13,500 | 15,500 | 14,500 | |
Estimated Sales | |||||
1st Quarter | 2nd Quarter | 3rd Quarter | 4th Quarter | Year | |
Budgeted unit sales | 12,500 | 13,500 | 15,500 | 14,500 | 56,000 |
Selling price per unit | 24 | 24 | 24 | 24 | 24 |
Budgeted Sales | 300,000 | 324,000 | 372,000 | 348,000 | 1,344,000 |
Expected Collections | |||||
1st Quarter | 2nd Quarter | 3rd Quarter | 4th Quarter | Year | |
Budgeted Sales | 300,000 | 324,000 | 372,000 | 348,000 | 1,344,000 |
75% in the same Quarter | 225,000 | 243,000 | 279,000 | 261,000 | 1,008,000 |
20% in following quarter | 73,200 | 60,000 | 64,800 | 74,400 | 272,400 |
Total Cash Collections | 298,200 | 303,000 | 343,800 | 335,400 | 1,280,400 |
Production Budget | |||||
1st Quarter | 2nd Quarter | 3rd Quarter | 4th Quarter | ||
Budgeted unit sales | 12,500 | 13,500 | 15,500 | 14,500 | |
Add: Desired Ending Inventory | 2,700 | 3,100 | 2,900 | 2,700 | |
Total Required | 15,200 | 16,600 | 18,400 | 17,200 | |
Less: Beginning Inventory | 2,500 | 2,700 | 3,100 | 2,900 | |
Required production in units | 12,700 | 13,900 | 15,300 | 14,300 |