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 12,500 13,500 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-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
			Q1	Q2	Q3	Q4	Year
Budgeted Sales units			12,500	13,500	15,500	14,500	56,000
Selling price per unit			24	24	24	24	24
Total Sales			300,000	324,000	372,000	348,000	1,344,000
EXPECTED CASH COLLECTIONS
			Q1	Q2	Q3	Q4	Year
Accounts receivable balance			73,200				73200
Q1 Sales			225,000	60000			285000
Q2 Sales				243000	64800		307800
Q3. Sales					279,000	74,400	353400
Q4 Sales						261,000	261000
Total Cash Collections			298,200	303,000	343,800	335,400	1280400
PRODUCTION BUDGET
			Q1	Q2	Q3	Q4	Year
Budgeted Sales Units			12,500	13,500	15,500	14,500	56,000
Add: Desired Ending Finished inventory			2,700	3,100	2,900	2,700	2,700
Total Needs			15,200	16,600	18,400	17,200	58,700
Less: Beginning Finished Inventory			2,500	2,700	3,100	2,900	2,500
Required Production in units			12,700	13,900	15,300	14,300	56,200