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: (SHOW ALL WORK)

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 for each quarter of fiscal year and for the year as a whole
S.No	Particulars	1st Quarter	2nd Quarter	3rd Quarter	4th Quarter	Total (Whole Year)
(a)	Budgeted unit sales	11700	12700	14700	13700	52800
(b)	Selling price per unit	16	16	16	16	16
(c )	Estimated Sales [(a)*(b)]	187200	203200	235200	219200	844800
2. Calculate the expected cash collections for each quarter of the fiscal year and for the year as a whole.
S.No	Particulars	1st Quarter	2nd Quarter	3rd Quarter	4th Quarter	Total (Whole Year)
(a)	Budgeted unit sales	11700	12700	14700	13700	52800
(b)	Selling price per unit	16	16	16	16	16
(c )	Estimated Sales [(a)*(b)]	187200	203200	235200	219200	844800
(d)	The beginning balance of accounts receivable	71600
(e )	Collection from 1st quarter sales	140400	37440
		(187200*75%)	(187200*20%)
(f)	Collection from 2nd quarter sales		152400	40640
			(203200*75%)	(203200*20%)
(g)	Collection from 3rd quarter sales			176400	47040
				(235200*75%)	(235200*20%)
(h)	Collection from 4th quarter sales				164400
					(219200*75%)
(i)	Expected cash collection each quarter	212000	189840	217040	211440
		(71600+140400)	(37440+152400)	(40640+176400)	(47040+164400)
(j)	Expected cash collection for whole year					830320
						(212000+189840+217040+211440)
3. Calculate the required production in units of finished goods for each quarter of the fiscal year and for the year as a whole.
S.No	Particulars	1st Quarter	2nd Quarter	3rd Quarter	4th Quarter	Total (Whole Year)
(a)	Sales	11700	12700	14700	13700	52800
(b)	Add: Desired ending finished inventory	1905	2205	2055	1955	1955
(c )	Less: Beginning finished inventory	1755	1905	2205	2055	1755
(d)	Required production in units [(a) + (b) - (c )]	11850	13000	14550	13600	53000