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	12,200	13,200	15,200	14,200

The selling price of the company’s product is $21 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 $72,600.

The company expects to start the first quarter with 2,440 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 2,640 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

Computation of Estimated sales
Particulars	Quarter 1	Quarter 2	Quarter 3	Quarter 4	Year
Unit Sales	12200	13200	15200	14200	54800
Selling price per unit	$21.00	$21.00	$21.00	$21.00	$21.00
Estimated Sales	$256,200.00	$277,200.00	$319,200.00	$298,200.00	$1,150,800.00
Solution 2:
Computation of Expected cash collection- Jessi Corporation
Particulars	Quarter 1	Quarter 2	Quarter 3	Quarter 4	Year
Collection of Accounts receivable	$72,600.00				$72,600.00
Collection of sales (65% in 1st quarter and 30% in 2nd Quarter:
1st Quarter collection	$166,530.00	$76,860.00			$243,390.00
2nd Quarter collection		$180,180.00	$83,160.00		$263,340.00
3rd Quarter collection			$207,480.00	$95,760.00	$303,240.00
4th Quarter collection				$193,830.00	$193,830.00
Tototal Expected Cash Collection	$239,130.00	$257,040.00	$290,640.00	$289,590.00	$1,076,400.00
Solution 3:
Computation of Estimated production of Finished goods
Particulars	Quarter 1	Quarter 2	Quarter 3	Quarter 4	Year
Sales units	12200	13200	15200	14200	54800
Add: Desired ending inventory (20% of next quarter sales)	2640	3040	2840	2640	2640
Less: Beginning Inventory	2440	2640	3040	2840	2440
Required Production ( unts)	12400	13600	15000	14000	55000