Question

The marketing department of Jess! Corporation has submitted the following sales forecast for the upcoming fiscal year (all sales are on accounts: Budgeted unit sales 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter 12,500 13,508 15,500 14,500 The selling price of the company's product is $24 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 $73,200. The company expects to start the first quarter with 2,500 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 2,700 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. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 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 Total sales Draw 54

Answer 1

Requirement 1.

Jessi Corporation
Statement showing estimated sales for each quarter and for the year as a whole
	1st Quarter	2nd Quarter	3rd Quarter	4th Quarter	Year
Expected sales in units	12,500	13,500	15,500	14,500	56,000
Sales price per unit	$ 24	$ 24	$ 24	$ 24	$ 24
Total expected sales (sales in unit × sales price per unit)	$ 300,000	$ 324,000	$ 372,000	$ 348,000	$ 1,344,000

Requirement 2.

Jessi Corporation
Statement showing expected cash collection for each quarter and for the year as a whole
	1st Quarter	2nd Quarter	3rd Quarter	4th Quarter	Year
Total expected sales (all are on account)	$ 300,000	$ 324,000	$ 372,000	$ 348,000	$ 1,344,000
Cash collected:
75% of each quarter sales	$ 225,000	$ 243,000	$ 279,000	$ 261,000
20% of previous quarter sales	$ 73,200	$ 60,000	$ 64,800	$ 74,400
Total Cash Collection	$ 298,200	$ 303,000	$ 343,800	$ 335,400	$ 1,280,400

Note : As the beginning balance of accounts receivable of the year is given ($73,200) and it is mentioned that, the entire balance is expected to be collected in the 1st quarter. For this cash collection from previous quarter in 1st quarter = $73,200

Requirement 3.

Jessi Corporation
Statement showing production of finish goods required for each quarter and for the year as a whole
	1st Quarter	2nd Quarter	3rd Quarter	4th Quarter	Year
Expected sales in units	12,500	13,500	15,500	14,500	56,000
Add: Desired ending inventory in units ( 20% of the next quarter's budgeted sales )	2,700	3,100	2,900	2,700	2,700
Total requirement of finish goods	15,200	16,600	18,400	17,200	58,700
Less: Beginning inventory in units ( Previous quarter's ending inventory)	2,500	2,700	3,100	2,900	2,500
Units to be produced/Production required	12,700	13,900	15,300	14,300	56,200

Note: 1. As beginning inventory and ending inventory of the year is given in the problem,

Beginning inventory of 1st Quarter = 2,500 units

Ending Inventory of 4th Quarter = 2,700 units

2. Calculation of Each Quarter Ending Inventory:

Ending Inventory = Next Quarter's Budgeted Sales × 20%

1st Quarter = 2nd Quarter's Sales × 20% = 13,500 units × 20% = 2,700 units

2nd Quarter = 3rd Quarter's Sales × 20% = 15,500 units × 20% = 2,900 units

3rd Quarter =  4th Quarter's Sales × 20% = 14,500 units × 20% = 2,900 units

4th Quarter = 2700 (given)