Exercise 7-14 Sales and Production Budgets [LO7-2, LO7-3] The marketing departme
ID: 2545283 • Letter: E
Question
Exercise 7-14 Sales and Production Budgets [LO7-2, LO7-3]
The marketing department of Jessi Corporation has submitted the following sales forecast for the upcoming fiscal year (all sales are on account):
The selling price of the company’s product is $21 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 $72,600.
The company expects to start the first quarter with 2,440 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 2,640 units.
Complete the company's sales budget.
Complete the schedule of expected cash collections.
Prepare the company’s production budget for the upcoming fiscal year.
References
The marketing department of Jessi Corporation has submitted the following sales forecast for the upcoming fiscal year (all sales are on account):
Explanation / Answer
Answer
Q1
Q2
Q3
Q4
Budgeted Unit Sales
12200
13200
15200
14200
Budgeted Sales price per unit
21
21
21
21
Total Budgeted Sales
$256200
$277200
$319200
$298200
Working - Amounts are in $
Q1
Q2
Q3
Q4
Total Budgeted Sales
256200
277200
319200
298200
65% collection
166530
180180
207480
193830
30% collection
76860
83160
95760
89460
Total Cash Collection-Amounts are in $
Q1
Q2
Q3
Q4
Cash collected from:
Accounts receivables
72600
Q1 Sale
166530
76860
Q2 Sale
180180
83160
Q3 Sale
207480
95760
Q4 Sale
193830
Total Collection in cash
239130
257040
290640
289590
Q1
Q2
Q3
Q4
Budgeted sale units
12200
13200
15200
14200
Add: desired ending inventory [20% of next quarter sale]
2640
3040
2840
[given] 2640
Total requirement
14840
16240
18040
16840
Less: Beginning inventory [=ending inventory of last quarter]
[given] 2440
2640
3040
2840
Units to be produced
12400
13600
15000
14000
Q1
Q2
Q3
Q4
Budgeted Unit Sales
12200
13200
15200
14200
Budgeted Sales price per unit
21
21
21
21
Total Budgeted Sales
$256200
$277200
$319200
$298200
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