The marketing department of Jessi Corporation has submitted the following sales
ID: 2348333 • Letter: T
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
Units to be produced
11,000
12,000
14,000
13,000
The selling price of the company's 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 quarter's budgeted sales. The desired ending finished goods inventory for the fourth quarter is 1,850 units.
Prepare the company's production budget for the upcoming fiscal year.
Explanation / Answer
a)
Quarter
1
2
3
4
Total
Budgeted Unit Sales
11,000
12,000
14,000
13,000
50,000
Selling Price per Unit
× $18
× $18
× $18
× $18
× $18
Total Sales
$198,000
$216,000
$252,000
$234,000
$900,000
b)
Quarter
1
2
3
4
Total
Accounts Receivable, Beginning
$70,200
$70,200
Quarter 1 Sales
$128,700
$59,400
$188,100
Quarter 2 Sales
$140,400
$64,800
$205,200
Quarter 3 Sales
$163,800
$75,600
$239,400
Quarter 4 Sales
$152,100
$152,100
Total Cash Collections
$198,900
$199,800
$228,600
$227,700
$855,000
Remember that collections in the quarter of sales is 65%, therefore for the first quarter $198,000 × 65% = $128,700, in the quarter following the sale, collections are expected to be 30%, therefore $198,000 × 30% = $59,400. The rest of the calculations are done the same way
a)
Quarter
1
2
3
4
Total
Budgeted Unit Sales
11,000
12,000
14,000
13,000
50,000
Selling Price per Unit
× $18
× $18
× $18
× $18
× $18
Total Sales
$198,000
$216,000
$252,000
$234,000
$900,000
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