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
12,000
14,000
13,000
11,000
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 sales budget and schedule of expected cash collections.
Prepare the company's production budget for the upcoming fiscal year.
Sales Budget:
1st Quarter: 12,000 units x $18.00 = $216,000
2nd Quarter: 14,000 units x $18.00 = $252,000
3rd Quarter: 13,000 units x $18.00 = $234,000
4th Quarter: 11,000 units x $18.00 = $198,000
Schedule of Expected Cash Collections:
1st Quarter: $216,000 x 65% = $140,400 + $70,200 = $210,600
2nd Quarter: $252,000 x 30% = $75,600
3rd Quarter: $234,000 x 5% = $11,700
4th Quarter: $0
Production Budget:
1st Quarter: 12,000 units + 1,650 units (beginning inventory) - 1,800 units (ending inventory) = 12,850 units
2nd Quarter: 14,000 units + 1,800 units (beginning inventory) - 2,100 units (ending inventory) = 14,700 units
3rd Quarter: 13,000 units + 2,100 units (beginning inventory) - 1,950 units (ending inventory) = 13,150 units
4th Quarter: 11,000 units + 1,950 units (beginning inventory) - 1,850 units (ending inventory) = 11,100 units
To prepare the company's sales budget and schedule of expected cash collections, follow these steps:
1. Calculate the total sales for each quarter by multiplying the units to be produced by the selling price:
1st Quarter: 12,000 units x $18.00/unit = $216,000
2nd Quarter: 14,000 units x $18.00/unit = $252,000
3rd Quarter: 13,000 units x $18.00/unit = $234,000
4th Quarter: 11,000 units x $18.00/unit = $198,000
2. Determine the expected collections for each quarter based on the given percentages:
1st Quarter: 65% x $216,000 = $140,400
2nd Quarter: [30% x $216,000] + [65% x $252,000] = $149,400 + $163,800 = $313,200
3rd Quarter: [30% x $252,000] + [65% x $234,000] = $75,600 + $152,100 = $227,700
4th Quarter: [30% x $234,000] + [65% x $198,000] = $70,200 + $128,700 = $198,900
3. Calculate the expected uncollectible amount for each quarter:
1st Quarter: 5% x $216,000 = $10,800 total uncollectible
2nd Quarter: 5% x $252,000 = $12,600 total uncollectible
3rd Quarter: 5% x $234,000 = $11,700 total uncollectible
4th Quarter: 5% x $198,000 = $9,900 total uncollectible
The company's sales budget and schedule of expected cash collections are as follows:
Sales Budget:
1st Quarter: $216,000
2nd Quarter: $252,000
3rd Quarter: $234,000
4th Quarter: $198,000
Schedule of Expected Cash Collections:
1st Quarter: $140,400
2nd Quarter: $313,200
3rd Quarter: $227,700
4th Quarter: $198,900
To prepare the company's production budget for the upcoming fiscal year, follow these steps:
1. Determine the desired ending finished goods inventory for each quarter:
1st Quarter: 15% x 14,000 units = 2,100 units
2nd Quarter: 15% x 13,000 units = 1,950 units
3rd Quarter: 15% x 11,000 units = 1,650 units
4th Quarter: 1,850 units (as given)
2. Calculate the total units needed for each quarter:
1st Quarter units required: units to be produced + desired ending inventory - beginning inventory
= 12,000 units + 2,100 units - 1,650 units (given) = 12,450 units
2nd Quarter units required: 14,000 units + 1,950 units - 2,100 units = 13,850 units
3rd Quarter units required: 13,000 units + 1,650 units - 1,950 units = 12,700 units
4th Quarter units required: 11,000 units + 1,850 units - 1,650 units = 11,200 units
The company's production budget for the upcoming fiscal year is as follows:
1st Quarter: 12,450 units
2nd Quarter: 13,850 units
3rd Quarter: 12,700 units
4th Quarter: 11,200 units
To prepare the company's sales budget and schedule of expected cash collections, we need to follow these steps:
Sales Budget:
1. Calculate the total sales for each quarter by multiplying the units to be produced by the selling price per unit.
- 1st Quarter sales: 12,000 units * $18.00 per unit = $216,000
- 2nd Quarter sales: 14,000 units * $18.00 per unit = $252,000
- 3rd Quarter sales: 13,000 units * $18.00 per unit = $234,000
- 4th Quarter sales: 11,000 units * $18.00 per unit = $198,000
Schedule of Expected Cash Collections:
2. Calculate the cash collection for each quarter using the given collection percentages.
- 1st Quarter collections: 65% of 1st Quarter sales + 100% of beginning accounts receivable - uncollectible amount
= (65% * $216,000) + ($70,200) - ($216,000 * 5%) = $154,800 + $70,200 - $10,800 = $214,200
- 2nd Quarter collections: 30% of 1st Quarter sales + 65% of 2nd Quarter sales
= (30% * $216,000) + (65% * $252,000) = $64,800 + $163,800 = $228,600
- 3rd Quarter collections: 30% of 2nd Quarter sales + 65% of 3rd Quarter sales
= (30% * $252,000) + (65% * $234,000) = $75,600 + $152,100 = $227,700
- 4th Quarter collections: 30% of 3rd Quarter sales + 65% of 4th Quarter sales
= (30% * $234,000) + (65% * $198,000) = $70,200 + $128,700 = $198,900
Now, let's move on to preparing the company's production budget for the upcoming fiscal year:
Production Budget:
3. Determine the desired units to be produced each quarter based on the desired ending finished goods inventory.
- 1st Quarter production: 1st Quarter sales + Desired 2nd Quarter ending inventory - Beginning inventory
= 12,000 + (14,000 * 15%) - 1,650 = 12,000 + 2,100 - 1,650 = 12,450
- 2nd Quarter production: 2nd Quarter sales + Desired 3rd Quarter ending inventory - 2nd Quarter ending inventory
= 14,000 + (13,000 * 15%) - (14,000 * 15%) = 14,000 + 1,950 - 2,100 = 13,850
- 3rd Quarter production: 3rd Quarter sales + Desired 4th Quarter ending inventory - 3rd Quarter ending inventory
= 13,000 + (11,000 * 15%) - (13,000 * 15%) = 13,000 + 1,650 - 1,950 = 12,700
- 4th Quarter production: 4th Quarter sales + 4th Quarter ending inventory - 4th Quarter ending inventory
= 11,000 + 1,850 - 1,850 = 11,000
Therefore, the company's sales budget would be:
1st Quarter: $216,000
2nd Quarter: $252,000
3rd Quarter: $234,000
4th Quarter: $198,000
The company's schedule of expected cash collections would be:
1st Quarter: $214,200
2nd Quarter: $228,600
3rd Quarter: $227,700
4th Quarter: $198,900
The company's production budget would be:
1st Quarter: 12,450 units
2nd Quarter: 13,850 units
3rd Quarter: 12,700 units
4th Quarter: 11,000 units