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	11,300	12,300	14,300	13,300

The selling price of the company’s product is $12 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 $70,800.

The company expects to start the first quarter with 1,695 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 1,895 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 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
	Budgeted unit sales		11,300	12,300	14,300	13,300		51200
	Selling price per unit		$               12	$                12	$               12	$               12
	Total Sales		$   1,35,600	$    1,47,600	$   1,71,600	$   1,59,600		$ 6,14,400
2)	Calculation of 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
	Collection of credit sales:
	Beginning accounts receivable		$       70,800					$     70,800
	1st Quarter's sales		$   1,01,700	$        27,120				$ 1,28,820
	2nd Quarter's sales			$    1,10,700	$       29,520			$ 1,40,220
	3rd Quarter's sales				$   1,28,700	$       34,320		$ 1,63,020
	4th Quarter's sales					$   1,19,700		$ 1,19,700
	Total		$   1,72,500	$    1,37,820	$   1,58,220	$   1,54,020		$ 6,22,560
3)	Calculation of 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
	Budgeted unit sales		11,300	12,300	14,300	13,300		51,200
	add: Ending inventory		1,845	2,145	1,995	1,895
	less:Beginning inventory		1,695	1,845	2,145	1,995
	Required production		11,450	12,600	14,150	13,200		51,400
	Working:
			1st Quarter	2nd Quarter	3rd Quarter
	Sales of Next Quarter		12,300	14,300	13,300
	Ending Inventory @ 15%		1,845	2,145	1,995