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

The marketing department of Jessi Corporation has submitted thefollowing sales forecast for the upcoming fiscal year (all salesare on account):

	1st Quarter	2nd Quarter	3rd Quarter	4th Quarter
Budgeted unit sales	11,300	12,300	14,300	13,300

The selling price of the company’s product is $12 per unit.Management expects to collect 75% of sales in the quarter in whichthe sales are made, 20% in the following quarter, and 5% of salesare expected to be uncollectible. The beginning balance of accountsreceivable, all of which is expected to be collected in the firstquarter, is $70,800.

The company expects to start the first quarter with 1,695 unitsin finished goods inventory. Management desires an ending finishedgoods inventory in each quarter equal to 15% of the next quarter’sbudgeted sales. The desired ending finished goods inventory for thefourth quarter is 1,895 units.

Required:

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

2. Calculate the expected cash collections for each quarter ofthe fiscal year and for the year as a whole.

3. Calculate the required production in units of finished goodsfor each quarter of the fiscal year and for the year as awhole.