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 Budgeted unit sales 12,500 13,500 15,500 14,500 The selling price of the company’s 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 quarter’s 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.

Answer 1

The estimated sales for each quarter are calculated by multiplying the budgeted unit sales by the selling price per unit. Expected cash collections are based on the percentage of sales collected in the quarter of the sale, the following quarter, and uncollectible sales. Required production units are determined by the desired ending inventory and the budgeted sales for that quarter.

Step-by-step explanation:

Estimated Sales Calculation

To calculate the estimated sales for each quarter, we multiply the number of budgeted unit sales by the selling price per unit. For the fiscal year, we sum up the sales of all quarters.

1st Quarter Sales = 12,500 units × $24/unit = $300,000

2nd Quarter Sales = 13,500 units × $24/unit = $324,000

3rd Quarter Sales = 15,500 units × $24/unit = $372,000

4th Quarter Sales = 14,500 units × $24/unit = $348,000

Total Fiscal Year Sales = $300,000 + $324,000 + $372,000 + $348,000 = $1,344,000
Expected Cash Collections

To calculate expected cash collections, we must consider the percentage of sales collected in the quarter of the sale, in the following quarter, and account for uncollectible sales.

1st Quarter Expected Collections = ($300,000 × 75%) + $73,200 (beginning balance) = $297,600

Required Production in Units

The required production is based on the desired ending inventory and the budgeted sales for the quarter

Desired Ending Inventory for 1st Quarter = 13,500 units (2nd Quarter Sales) × 20% = 2,700 units

...

Answer 2

Jessi Corporation

1st 2nd 3rd 4th

Quarter Quarter Quarter Quarter Total

1. Sales $300,000 $324,000 $372,000 $348,000 $1,344,000

2. Expected cash

collections $298,200 $303,000 $343,800 $335,400 $1,280,400

3. Units to be

produced 12,700 13,900 15,300 14,100 56,200

Step-by-step explanation:

a) Data and Calculations:

1st 2nd 3rd 4th

Quarter Quarter Quarter Quarter Total

Estimated unit sales 12,500 13,500 15,500 14,500 56,000

Ending Inventory 2,700 3,100 2,900 2,700 2,700

Units available for sale 15,200 16,600 18,400 17,200 58,700

Beginning Inventory 2,500 2,700 3,100 3,100 2,500

Units to be produced 12,700 13,900 15,300 14,100 56,200

Selling price = $24 per unit

Credit Sales $300,000 $324,000 $372,000 $348,000 $1,344,000

Cash Collection:

75% in quarter $225,000 $243,000 $279,000 $261,000 $1,008,000

20% ffg quarter 73,200 60,000 64,800 74,400 272,400

Total collection $298,200 $303,000 $343,800 $335,400 $1,280,400