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 11,000 12,000 14,000 13,000

The selling price of the company’s product is $18.00 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 $70,200.

The company expects to start the first quarter with 1,650 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 1,850 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

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

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

Calculate the required production in units of finished goods for each quarter of the fiscal year and for the year as a whole.

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

Solutions

Expert Solution

Sales Budget
1st Qtr 2nd Qtr 3rd Qtr 4th Qtr year
Budgeted units sales 11,000 12,000 14,000 13,000 50,000
Selling price per unit 18 18 18 18 18
Total sales 198000 216000 252000 234000 900000
Schedule of Expected Cash collection
1st Qtr 2nd Qtr 3rd Qtr 4th Qtr year
Beginning accounts receivable 70,200 70,200
1st Qtr sale 128700 59400 188100
2nd Qtr sale 140400 64800 205200
3rd Qtr sale 163800 75600 239400
4th Qtr sale 152100 152100
Total cash collection 198,900 199800 228600 227700 855,000
Production Budget
1st Qtr 2nd Qtr 3rd Qtr 4th Qtr year
budgeted unit sales 11,000 12,000 14,000 13,000 50,000
Add Ending invnetory 1800 2100 1950 1,850 1,850
total needs 12,800 14,100 15,950 14,850 51,850
less opening inventory -1650 -1,800 -2,100 -1,950 -1,650
Required production in units 11,150 12,300 13,850 12,900 50,200

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