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	12,400	13,400	15,400	14,400

The selling price of the company’s product is $23 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 $73,000.

The company expects to start the first quarter with 2,480 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 2,680 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

SALES BUDGET
			Q1	Q2	Q3	Q4	Total
Budgeted Sales units			12,400	13,400	15,400	14,400	55,600
Selling price per unit			23	23	23	23	23
Total Sales			285,200	308,200	354,200	331,200	1,278,800
EXPECTED CASH COLLECTIONS
			Q1	Q2	Q3	Q4	Total
Beginning Accounts receivable			73,000				73000
Q1 Sales			185,380	85560			270940
Q2 Sales				200330	92460		292790
Q3 Sales					230,230	106,260	336490
Q4 Sales						215,280	215280
Total Cash Collections			258,380	285,890	322,690	321,540	1188500
PRODUCTION BUDGET
			Q1	Q2	Q3	Q4	Total
Budgeted Sales Units			12,400	13,400	15,400	14,400	55,600
Add: Desired Ending Finished inventory			2,680	3,080	2,880	2,680	2,680
Total Needs			15,080	16,480	18,280	17,080	58,280
Less: Beginning Finished Inventory			2,480	2,680	3,080	2,880	2,480
Required Production in units			12,600	13,800	15,200	14,200	55,800