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	11,100	12,100	14,100	13,100

The selling price of the company’s product is $10 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 $70,400.

The company expects to start the first quarter with 1,665 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 1,865 units.

Required:

1-a.	Complete the company's sales budget.

            

1-b.	Complete the schedule of expected cash collections.

            

2.	Prepare the company’s production budget for the upcoming fiscal year.

           

Answer 1

All Amounts are in $

Ans1-a. Company's sales budget is as under:-

Particulars	Quarter1	Quarter2	Quarter3	Quarter4
Sales Budget	111,000	121,000	141,000	131,000

Ans1-b. Collections in cash are as under

Particulars	Quarter1	Quarter2	Quarter3	Quarter4
Sales	111,000	121,000	141,000	131,000
75% in Same Quarter(A)	83250	90750	105750	98250
20% of Previous Quarter(B)	0	22200	24200	28200
Amount of just before 1st Quarter received(C)	70400	0	0	0
Total Cash Collections	153650	112950	129950	126450

Ans2. The Company's Production budget for the fiscal year is as follows:

The formula for production is equal to -

Sales units + closing stock - opening stock

Particulars	Quarter1	Quarter2	Quarter3	Quarter4
Sales in units(A)	11100	12100	14100	13100
opening stock(B)	1665	1815	2115	1965
closing stock(C)	1815	2115	1965	1865
Production in units by using above formula(A + C - B)	11250	12400	13950	13000