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	12,200	13,200	15,200	14,200

The selling price of the company’s product is $21 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 $72,600.

The company expects to start the first quarter with 2,440 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 2,640 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

SALES BUDGET
			Q1	Q2	Q3	Q4	TOTAL
Budgeted Sales units			12,200	13,200	15,200	14,200	54,800
Selling price per unit			21	21	21	21	21
Total Sales			256,200	277,200	319,200	298,200	1,150,800
EXPECTED CASH COLLECTIONS
			Q1	Q2	Q3	Q4	TOTAL
Beginning Account receivable			72,600				72600
Q1 Sales			166,530	76860			243390
Q2 Sales				180180	83160		263340
Q3 Sales					207,480	95,760	303240
Q4 Sales						193,830	193830
Total Cash Collections			239,130	257,040	290,640	289,590	1076400
PRODUCTION BUDGET
			Q1	Q2	Q3	Q4	TOTAL
Budgeted Sales Units			12,200	13,200	15,200	14,200	54,800
Add: Desired Ending Finished inventory			2,640	3,040	2,840	2,640	2,640
Total Needs			14,840	16,240	18,040	16,840	57,440
Less: Beginning Finished Inventory			2,440	2,640	3,040	2,840	2,440
Required Production in units			12,400	13,600	15,000	14,000	55,000