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Garber Corporatioan: Sales and Production Budgets

Sales and Production Budgets
The marketing department of Graber Corporation has submitted the following sales forecast for the upcoming fiscal year.

1st Quarter 2nd Quarter 3rd Quarter 4th Quarter
Budgeted unit sales..................... 16,000 15,000 14,000 15,000

The selling price of the company's product is $22.00 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 $66,000.

The company expects to start the first quarter with 3,200 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 3,400.

Required:
1. Prepare the company's sales budget and schedule of expected cash collections.
2. Prepare the company's production budget for the upcoming fiscal year.

Solution Preview

1. Prepare the company's sales budget and schedule of expected cash collections.

Sales Budget
Q1 Q2 Q3 Q4
Unit Sales 16000 15000 14000 15000
Selling Price 22 22 22 22
Total sales 352000 330000 308000 330000

Schedule of Expected Cash Collection
Q1 Q2 Q3 Q4
From Cash ...

Solution Summary

This explains the steps to compute the sales and production budgets, expected cash collections. 222 words.

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