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

Ans. 1	JESSI CORPORATION
	Sales Budget
	Particulars	1st quarter	2nd quarter	3rd quarter	4th quarter
	Budgeted unit sales	11900	12900	14900	13900
	(*) Selling price per unit	$18	$18	$18	$18
	Total sales	$214,200	$232,200	$268,200	$250,200
Ans. 2	Shedule of Expected Cash Collections
	Particulars	1st quarter	2nd quarter	3rd quarter	4th quarter
	Accounts receivable balance	$72,000
	1st quarter	$160,650	$42,840
	2nd quarter		$174,150	$46,440
	3rd quarter			$201,150	$53,640
	4th quarter				$187,650
	Total cash collections	$232,650	$216,990	$247,590	$241,290
	*Calculations:
	Particulars	1st quarter	2nd quarter	3rd quarter	4th quarter
	Accounts receivable balance	given
	1st quarter	$214,200*75%	$214,200*20%
	2nd quarter		$232,200*75%	$232,200*20%
	3rd quarter			$268,200*75%	$268,200*20%
	4th quarter				$250,200*75%
Ans. 3	JESSI CORPORATION
	Production Budget
	For the Year Ended December 31
		First quarter	Second quarter	Third quarter	Fourth quarter	Total
	Sales	11900	12900	14900	13900
	Add: Desired Ending inventory	1935	2235	2085	1985
	Total needs	13,835	15,135	16,985	15,885
	Less: Beginning inventory	-1785	-1935	-2235	-2085
	Units to be produced	12,050	13,200	14,750	13,800	53,800
*Calculations for Ending inventory:				*Calculations for Beginning inventory:
Quarter				Quarter
1	12,900 * 15%	1935		1	(given)	1785
2	14,900 * 15%	2235		2	Ending inventory of Q1	1935
3	13,900 * 15%	2085		3	Ending inventory of Q2	2235
4	(given)	1985		4	Ending inventory of Q3	2085