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	12,300	13,300	15,300	14,300

The selling price of the company’s product is $22 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 $72,800.

The company expects to start the first quarter with 2,460 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 2,660 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

1.a Computing Total Sales.

Particulars	Quarter 1	Quarter 2	Quarter 3	Quarter 4
Sales units	12300	13300	15300	14300
Selling Price	22	22	22	22
Sales Value	270600	292600	336600	314600

1.b Computing Expected Cash Collection.

particulars	Quarter 1	Quarter 2	Quarter 3	Quarter 4
Collection from
Current month sales	202950	219450	252450	235950
Previous month sales	72800	54120	58520	67320
Total collection	275750	273570	310970	303270

2. Computing production budget.

Particulars	Quarter 1	Quarter 2	Quarter 3	Quarter 4
Sales units	12300	13300	15300	14300
+ Closing units	2660	3060	2860	2660
- Opening Units	-2460	-2660	-3060	-2860
Production	12500	13700	15100	14100