Question

(B).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	11,400	12,400	14,400	13,400

The selling price of the company’s product is $13 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 $71,000.

The company expects to start the first quarter with 1,710 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 1,910 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

1
Estimated sales for each quarter and in total
	1st Quarter	2nd Quarter	3rd Quarter	4th Quarter	Total
Budgeted unit sales (a)	11400	12400	14400	13400	51600
Selling price per unit (b)	$13	$13	$13	$13	$13
Budgeted sales revenue (a*b)	$148,200	$161,200	$187,200	$174,200	$670,800
2
Calculate expected cash collection
	1st Quarter	2nd Quarter	3rd Quarter	4th Quarter	Total
Current quarter sales collection - 65%*Sales	$96,330	$104,780	$121,680	$113,230	$436,020
Previous quarter sales collection - 30%*Sales	71000	$44,460	$48,360	$56,160	$219,980
Total expected cash collection	$167,330	$149,240	$170,040	$169,390	$656,000
3
Required production for each quarter and in total
	1st Quarter	2nd Quarter	3rd Quarter	4th Quarter	Total
Budgeted unit sales	11,400	12,400	14,400	13,400	51,600
Add: Desired ending inventory (Next quarter sales*15%)	1,860	2,160	2,010	1,910	1,910
Total required units	13,260	14,560	16,410	15,310	53,510
Less: Beginning inventory	1,710	1,860	2,160	2,010	1,710
Budgeted production	11,550	12,700	14,250	13,300	51,800