EXERCISE 714 Sales and Production Budgets [LO72, LO73]

The marketing department of Jessi Corporation has submitted the following sales forecast for the upcoming fiscal year (all sales are on account):

Selling price per unit = $2,500

Budgeted unit sales in 2nd Quarter = 16,000

The selling price of the companys product is $18.00 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 $70,200.

The company expects to start the first quarter with 1,650 units in finished goods inventory. Management desires an ending finished goods inventory in each quarter equal to 15% of the next quarters budgeted sales. The desired ending finished goods inventory for the fourth quarter is 1,850 units.

Required:

1. Prepare the companys sales budget and schedule of expected cash collections.

2. Prepare the companys production budget for the upcoming fiscal year.

\begin{tabular}{lcccc} \hline & 1st Quarter & 2nd Quarter & 3rd Quarter & 4th Quarter \\ \hline Budgeted unit sales & 11,000 & 12,000 & 14,000 & 13,000 \end{tabular}