Question

Budgeting In-Class Assignment Question 1: The Marketing Department of Jessi Corporation has submitted the following sales forecast for the upcoming fiscal year: 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Budgeted sales (units) 8,000 10,000 12,000 11,000 The selling price of the company's product is $20 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 $80,500. The company expects to start the first quarter with 2000 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 2, 250 units. Required: 1. Prepare the company's sales budget and schedule of expected cash collections. 2. Prepare the company's production budget for the upcoming fiscal year.

Answer 1

1) Sales budget

	1st quarter	2nd quarter	3rd quarter	4th quarter	Year
Budgeted sales	8000	10000	12000	11000	41000
Selling price	20	20	20	20	20
Sales revenue	160000	200000	240000	220000	820000

2) Schedule of expected cash collection

	1st quarter	2nd quarter	3rd quarter	4th quarter	Year
65% of month sales	104000	130000	156000	143000	533000
30% of previous month sales	80500	48000	60000	72000	260500
Total Collection	184500	178000	216000	215000	793500

3) Production budget

	1st quarter	2nd quarter	3rd quarter	4th quarter	Year
Sales unit	8000	10000	12000	11000	41000
Add: Desired ending inventory	1500	1800	1650	2250	2250
Total	9500	11800	13650	13250	43250
Less: Beginning inventory	-2000	-1500	-1800	-1650	-2000
Production units	7500	10300	11850	11600	41250