Exercise 8-14 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	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 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 $73,200.

The company expects to start the first quarter with 2,500 unitsin finished goods inventory. Management desires an ending finishedgoods inventory in each quarter equal to 20% of the next quarter’sbudgeted sales. The desired ending finished goods inventory for thefourth quarter is 2,700 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.

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

	1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Year Total sales $300,000 $324,000 $372,000 $348,000 $1,344,000

Requirement 2

	1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Year Total cash collections

Requirement 3

1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Year Required production inunits