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-a.	Compute the company’s total sales.

            

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

            

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

           

Answer 1

SALES BUDGET
			Q-1	Q-2	Q-3	Q-4	Total
Budgeted Sales units			12,200	13,200	15,200	14,200	54,800
Selling price per unit			21	21	21	21	21
Budgeted Sales in $			256,200	277,200	319,200	298,200	1,150,800
EXPECTED CASH COLLECTIONS
			Q-1	Q-2	Q-3	Q-4	Total
Beginning Accounts receivable			72,600				72,600
Quarter-1 sales			166,530	89670			256,200
Quarter-2 Sales				180180	97020		277,200
Quarter-3 Sales					207,480	111720	319,200
Quarter-4 Sales						193830	193,830
Total Cash Collections			239,130	269,850	304,500	305,550	119030
PRODUCTION BUDGET
			Q-1	Q-2	Q-3	Q-4	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