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

1.

	Qtr 1	Qtr 2	Qtr 3	Qtr 4	Total
Budgeted unit sales	12400	13400	15400	14400	55600
Sale price	23	23	23	23	23
Budgeted sales	285200	308200	354200	331200	1,278,800

2.

	Qtr 1	Qtr 2	Qtr 3	Qtr 4	Total
Opening accounts receivable	73,000				73,000
Qtr 1 sales	185,380	85,560			270940
Qtr 2 sales		200,330	92,460		292790
Qtr 3 sales			230,230	106,260	336490
Qtr 4 sales				215,280	215280
Total cash collections	258380	285890	322690	321540	1,188,500

3.

	Qtr 1	Qtr 2	Qtr 3	Qtr 4	Total
Budgeted unit sales	12400	13400	15400	14400	55600
Add: Ending inventory	2680	3080	2880	2680	2680
Total needs	15080	16480	18280	17080	58280
Less: Opening inventory	(2480)	(2680)	(3080)	(2880)	(2480)
Production budget in units	12600	13800	15200	14200	55800