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 11,900 12,900 14,900 13,900 The selling price of the company’s product is $18 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 $72,000. The company expects to start the first quarter with 1,785 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 1,985 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

Solution 1:

Computation of Estimated sales
Particulars	Quarter 1	Quarter 2	Quarter 3	Quarter 4	Year
Sales units	11900	12900	14900	13900	53600
Selling price per unit	$18.00	$18.00	$18.00	$18.00	$18.00
Estimated Sales	$2,14,200.00	$2,32,200.00	$2,68,200.00	$2,50,200.00	$9,64,800.00

Solution 2:

Computation of Expected cash collection
Particulars	Quarter 1	Quarter 2	Quarter 3	Quarter 4	Year
Collection of Accounts receivable	$72,000.00				$72,000.00
Collection of sales (75% in 1st quarter and 20% in 2nd Quarter:
1st Quarter sales collection	$1,60,650.00	$42,840.00			$2,03,490.00
2nd Quarter sales collection		$1,74,150.00	$46,440.00		$2,20,590.00
3rd Quarter sales collection			$2,01,150.00	$53,640.00	$2,54,790.00
4th Quarter sales collection				$1,87,650.00	$1,87,650.00
Total Expected Cash Collection	$2,32,650.00	$2,16,990.00	$2,47,590.00	$2,41,290.00	$9,38,520.00

Solution 3:

Computation of Required production of Finished goods
Particulars	Quarter 1	Quarter 2	Quarter 3	Quarter 4	Year
Sales units	11900	12900	14900	13900	53600
Add: Desired ending inventory (15% of next quarter sales)	1935	2235	2085	1985	1985
Less: Opening Inventory	1785	1935	2235	2085	1785
Required Production in units	12050	13200	14750	13800	53800