Question

In: Accounting

Exercise 8-14 Sales and Production Budgets [LO8-2, LO8-3] The marketing department of Jessi Corporation has submitted...

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.

1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Year
Total sales $300,000 $324,000 $372,000 $348,000 $1,344,000

Requirement 2

1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Year
Total cash collections

Requirement 3

1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Year
Required production in units

Solutions

Expert Solution

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

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