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	11,400	12,400	14,400	13,400

The selling price of the company’s product is $13 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 $71,000.

The company expects to start the first quarter with 1,710 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 1,910 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.

Calculate 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 Total sales

Calculate 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 Total cash collections

Calculate 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 Required production in units

Answer 1

1. Calculation of Estimated sales
Jessi Corporation
Sales Budget
	1st Quarter	2nd Quarter	3rd Quarter	4th Quarter	Year
Budgeted unit sales	11400	12400	14400	13400	51600
Selling price per unit	13	13	13	13	13
Total sales	148200	161200	187200	174200	670800
2. Calculation of expected Cash Collection
Jessi Corporation
Schedule of expected cash collections
	1st Quarter	2nd Quarter	3rd Quarter	4th Quarter	Year
Beginning Accounts Receivable	$71,000				$71,000
	(100%)
1st Quarter sales	$96,330	$44,460			$140,790
	($148,200 *65%)	($148,200 *30%)
2nd Quarter sales	$0	$104,780	$48,360		$153,140
		($161,200 *65%)	($161,200 *30%)
3rd Quarter sales	$0	$0	$121,680	$56,160	$239,020
			($187,200 *65%)	($187,200 *30%)
4th Quarter sales	$0	$0	$0	$113,230	$152,490
				($174,200 *65%)
Total cash collections	$167,330	$149,240	$170,040	$169,390	$756,440
3. Calculation of required production in units
Jessi Corporation
Production Budget
	1st Quarter	2nd Quarter	3rd Quarter	4th Quarter	Year
Budgeted unit sales	11400	12400	14400	13400	53200
Add: Ending inventory	1860	2160	2010	1910	1910
	(12,400 * 15%)	(14,400 * 15%)	(13,400 * 15%)	(given)
Total Needs	13260	14560	16410	15310	55110
Less: Beginning inventory	1710	1860	2160	2010	1710
	(Given)	(from Quarter 1)	(from Quarter 2)	(from Quarter 3)
Required production	11550	12700	14250	13300	53400