In: Accounting
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 | 12,800 | 13,800 | 15,800 | 14,800 |
The selling price of the company’s product is $27 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 $73,800.
The company expects to start the first quarter with 2,560 units in finished goods inventory. Management desires an ending finished goods inventory in each quarter equal to 20% of the next quarter’s budgeted sales. The desired ending finished goods inventory for the fourth quarter is 2,760 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.
Solution 1:
Budgeted Sales (In Units) is already given.
Q1 | Q2 | Q3 | Q4 | Total | |
Budgeted Sales (In Units) | 12800 | 13800 | 15800 | 14800 | 57200 |
Expected Selling Price per unit | 27 | 27 | 27 | 27 | 27 |
Budgeted Sales (In Dollars) | 345,600 | 372,600 | 426,600 | 399,600 |
1,544,400 |
Solution 2:
Calculation of Expected cash Collection Quarter wise and Whole Year
Q1 | Q2 | Q3 | Q4 | Total | |
Opening Accounts Receivable | 73,800 | 73,800 | |||
1st Quarter Sales | 224,640 | 103,680 | 328,320 | ||
2nd Quarter Sales | 242,190 | 111,780 | 353,970 | ||
3rd Quarter Sales | 277,290 | 127,980 | 405,270 | ||
4th Quarter Sales | 259,740 | 259,740 | |||
Total | 298,440 | 345,870 | 389,070 | 387,720 | 1,421,100 |
Working Note:
Solution 3:
Production in units of finished goods for each quarter of the fiscal year and for the year as a whole:
Q1 | Q2 | Q3 | Q4 | Total | |
Closing Inventory | 2,760 | 3,160 | 2,960 | 2,760 | 2,760 |
Add:Sales | 12,800 | 13,800 | 15,800 | 14,800 | 57,200 |
Less:Opening Inventory | 2,560 | 2,760 | 3,160 | 2,960 | 2,560 |
Production (in units) | 13,000 | 14,200 | 15,600 | 14,600 | 57,400 |
Working Note: