People Company makes a product that is very popular to all. It has peak sales in the third
quarter. The following information concerns operations for first two quarters of year 3.
a) Company’s single product sells for $7.5 per unit. Budgeted sales in units for next six
quarters are as follows-
                                            Year 2 quarter                   Year 3 quarter
                                       1              2       3           4        1          2
Budgeted unit sales...... 65000 75000 110000 70000 80000 85000
b) Sales are collected in following pattern. 65% in the quarter the sales are made, the
remaining 35% in the following quarter. On January 1, year 2 company’s balance
sheet showed $80,500 in account receivable, all of which will be collected in the first
quarter of the year.
c) The company desires the ending finished goods inventory at the end of each quarter
equals to 35% of budgeted unit sales for next quarter. On December 31, year 1
Company has 21,000 units on hand.
Requirement:
I. Prepare a sales budget and a schedule of expected cash collections.
II. A production budget.