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	11,400	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.

Sales Budget
	First Qtr.	Second Qtr.	Third Qtr.	Fourth Qtr.	Total
Budgeted Unit Sales	11400	12400	14400	13400	51600
Selling Price per unit	$              13	$                  13	$              13	$              13
Budgeted Sales Revenue	$    148,200	$        161,200	$    187,200	$    174,200	$    670,800

2.

Expected Cash Collections
	First Qtr.	Second Qtr.	Third Qtr.	Fourth Qtr.	Total
Accounts Receivable	$       71,000				$       71,000
From Credit Sales
First Qtr.	$       96,330	$          44,460			$    140,790
Second Qtr.		$        104,780	$       48,360		$    153,140
Third Qtr.			$    121,680	$       56,160	$    177,840
Fourth Qtr.				$    113,230	$    113,230
Total Cash Collections	$    167,330	$        149,240	$    170,040	$    169,390	$    656,000

3.

Production Budget
	First Qtr.	Second Qtr.	Third Qtr.	Fourth Qtr.	Total
Budgeted Unit Sales	11400	12400	14400	13400	51600
Desired Ending Inventory	1860	2160	2010	1910	1910
Total Goods Required	13260	14560	16410	15310	53510
Less : Beginning Inventory	1710	1860	2160	2010	1710
Production Required	11550	12700	14250	13300	51800