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	11,700	12,700	14,700	13,700

The selling price of the company’s product is $16 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 $71,600.

The company expects to start the first quarter with 1,755 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 1,955 units.

Required:

1-a.	Compute the company’s total sales.

1-b.	Complete the schedule of expected cash collections.

2.	Prepare the company’s production budget for the upcoming fiscal year.

Answer 1

Solution 1a:

Sales Budget - Jessi Corporation
Particulars	Q1	Q2	Q3	Q4	Total
Budgeted unit sales	11700	12700	14700	13700	52800
Selling price per unit	$16.00	$16.00	$16.00	$16.00	$16.00
Budgeted Sales	$187,200.00	$203,200.00	$235,200.00	$219,200.00	$844,800.00

Solution 1b:

Schedule of Expected cash collection
Particulars	Q1	Q2	Q3	Q4	Total
Beginning accounts receivables	$71,600.00				$71,600.00
Collection of Q1 Sales	$140,400.00	$37,440.00			$177,840.00
Collection of Q2 Sales		$152,400.00	$40,640.00		$193,040.00
Collection of Q3 Sales			$176,400.00	$47,040.00	$223,440.00
Collection of Q4 Sales				$164,400.00	$164,400.00
Total Cash Collections	$212,000.00	$189,840.00	$217,040.00	$211,440.00	$830,320.00

Solution 2:

Production Budget - Jessi Corporation
Particulars	Q1	Q2	Q3	Q4	Total
Budgeted unit sales	11700	12700	14700	13700	52800
Add: Desired ending inventory (15% of next quarter sales)	1905	2205	2055	1955	1955
Total needs	13605	14905	16755	15655	54755
Less: Beginning inventory	1755	1905	2205	2055	1755
Budgeted production units	11850	13000	14550	13600	53000