Exercise 8-14 Sales and Production Budgets [LO8-2, LO8-3]

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 companys 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 quarters budgeted sales. The desired ending finished goods inventory for the fourth quarter is 2,700 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.

Calculate the estimated sales for each quarter of the fiscal year and for the year as a whole.

	1st Quarter	2nd Quarter	3rd Quarter	4th Quarter	Year
Total sales	$300,000	$324,000	$372,000	$348,000	$1,344,000

Requirement 2

	1st Quarter	2nd Quarter	3rd Quarter	4th Quarter	Year
Total cash collections

Requirement 3

1st Quarter	2nd Quarter	3rd Quarter	4th Quarter	Year
Required production in units