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	12,900	13,900	15,900	14,900

The selling price of the company’s product is $28 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 $74,000.

The company expects to start the first quarter with 2,580 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 2,780 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.CALCULATION OF ESTIMATED SALES

	1ST QUARTER	2ND QUARTER	3RD QUARTER	4TH QUARTER	TOTAL
ESTIMATED SALES	12,900 UNITS	13,900 UNITS	15,900 UNITS	14,900 UNITS	57,600 UNITS
SALE PRICE	$28	$28	$28	$28
SALES VALUE	$361,200	$389,200	$445,200	$417,200	16,12,800

2.CALCUATION OF EXPECTED CASH COLLECTION

	1ST QUARTER	2ND QUARTER	3RD QUARTER	4TH QUARTER	TOTAL
SALES VALUE	$361,200	$389,200	$445,200	$417,200	16,12,800
CASH COLLECTED IST QUARTER	$344,900	$72,240
CASH COLLECTED 2ND QUARTER		$291,900	$77,840
CASH COLLECTED 3RD QUARTER			$333,900	$89,040
CASH COLLECTED 4TH QUARTER				$312,900
	$344,900	$364,140	$411,740	$401,940

3.REQUIRED PRODUCTION:

	1ST QUARTER	2ND QUARTER	3RD QUARTER	4TH QUARTER	TOTAL
BEGINNING INVENTORY	(2,580 UNITS)	(2,780 )UNITS	(3,180 )UNITS	(2,980 )UNITS	(11,520 )UNITS
ENDING INVENTORY	2,780 UNITS	3,180 UNITS	2,980 UNITS	2,780 UNITS	11,720 UNITS
SALES	12,900 UNITS	13,900 UNITS	15,900 UNITS	14,900 UNITS	57,600 UNITS
PRODUCTION REQ	13,100 UNITS	14,300 UNITS	15,700 UNITS	14,700 UNITS	57,800 UNITS