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.

Answer 1

1) Calculation of Estimated sales (Amounts in $)

Particulars	1st Qtr	2nd Qtr	3rd Qtr	4th Qtr	Year
Budgeted Sales in units (A)	11,400	12,400	14,400	13,400	51,600
Sale Price per unit (B)	$13	$13	$13	$13	$13
Budgeted Sales (A*B)	148,200	161,200	187,200	174,200	670,800

2) Calculation of Expected Cash collections (Amounts in $)

Particulars	1st Qtr	2nd Qtr	3rd Qtr	4th Qtr	Year
Collection for the Quarter:
4th Quarter of previous year	71,000	-	-	-	71,000
1st Qtr (65% in Ist Qtr and 30% in 2nd Qtr)	96,330	44,460	-	-	140,790
2nd Qtr	-	104,780	48,360	-	153,140
3rd Qtr	-	-	121,680	56,160	177,840
4th Qtr	-	-	-	113,230	113,230
Total	167,330	149,240	170,040	169,390	656,000

3) Calculation of required production in units   

Particulars	1st Qtr	2nd Qtr	3rd Qtr	4th Qtr	Year
Budgeted unit sales	11,400	12,400	14,400	13,400	51,600
Add: Ending Inventory (15% of sales of next Qtr)	1,860	2,160	2,010	1,910	1,910
Less: Beginning Inventory	(1,710)	(1,860)	(2,160)	(2,010)	(1,710)
Production Required	11,550	12,700	14,250	13,300	51,800