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	12,000	13,000	15,000	14,000

The selling price of the company’s product is $19 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 $72,200.

The company expects to start the first quarter with 2,400 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 2,600 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

Jessi Corporation
Sales Budget
Particulars	1st Qtr	2nd Qtr	3rd Qtr	4th Qtr	Year
Budgeted Units Sales	12,000	13,000	15,000	14,000	54,000
Selling Price Per Unit	19	19	19	19	19
Total Sales	2,28,000	2,47,000	2,85,000	2,66,000	10,26,000
Schedule of Expected Cash Flows:
Particulars	1st Qtr	2nd Qtr	3rd Qtr	4th Qtr	Year
Beginning Accounts Receivable	72,200				72,200
1st Qtr Sales	2,27,999	68,400			2,96,399
2nd Qtr Sales		1,60,550	74,100		2,34,650
3rd Qtr Sales			1,85,250	85,500	2,70,750
4th Qtr Sales				1,72,900	1,72,900
Total Cash Collections	3,00,199	2,28,950	2,59,350	2,58,400	10,46,899
Production Budget
Particulars	1st Qtr	2nd Qtr	3rd Qtr	4th Qtr	Year
Opening Units	2,400
Budgeted Unit Sales	12,000	13,000	15,000	14,000	54,000
Add: Desired Closing Units	2,600	3,000	2,800	2,600	11,000
Total Needs	17,000	16,000	17,800	16,600	65,000
Required Production Units	11,800	10,000	12,200	11,400	43,000
					Jessi Corporation Sales Budget Particulars 1st Qtr 2nd Qtr 3rd Qtr 4th Qtr Year Budgeted Units Sales          12,000          13,000          15,000          14,000          54,000 Selling Price Per Unit                 19                 19                 19                 19                 19 Total Sales       2,28,000       2,47,000       2,85,000       2,66,000     10,26,000 Schedule of Expected Cash Flows: Particulars 1st Qtr 2nd Qtr 3rd Qtr 4th Qtr Year Beginning Accounts Receivable          72,200          72,200 1st Qtr Sales       2,27,999          68,400       2,96,399 2nd Qtr Sales       1,60,550          74,100       2,34,650 3rd Qtr Sales       1,85,250          85,500       2,70,750 4th Qtr Sales       1,72,900       1,72,900 Total Cash Collections       3,00,199       2,28,950       2,59,350       2,58,400     10,46,899 Production Budget Particulars 1st Qtr 2nd Qtr 3rd Qtr 4th Qtr Year Opening Units            2,400 Budgeted Unit Sales          12,000          13,000          15,000          14,000          54,000 Add: Desired Closing Units            2,600            3,000            2,800            2,600          11,000 Total Needs          17,000          16,000          17,800          16,600          65,000 Required Production Units          11,800          10,000          12,200          11,400          43,000