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 11,600 12,600 14,600 13,600

The selling price of the company’s product is $15 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 $71,400. The company expects to start the first quarter with 1,740 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 1,940 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. 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
Sales unit	11600	12600	14600	13600	52400
Selling price per unit	15	15	15	15	15
Budgeted total sales	174000	189000	219000	204000	786000

2. 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
Account receivable	71400				71400
1st quarter sales	113100	52200			165300
2nd quarter sales		122850	56700		179550
3rd quarter sales			142350	65700	208050
4th quarter sales				132600	132600
Total Cash collection	184500	175050	199050	198300	756900

3. 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
Sales units	11600	12600	14600	13600	52400
Add: Desired ending inventory	1890	2190	2040	1940	1940
Total needs	13490	14790	16640	15540	54340
Less: Beginning inventory	-1740	-1890	-2190	-2040	-1740
Production units	11750	12900	14450	13500	52600