Chapter 8, Problem 14E

1.

To determine

The estimated sale for each quarter of the fiscal year

Introduction: Budget is the evaluation of the revenue and the expense which is expected incur in the specified period.

Answer to Problem 14E

Solution: The estimated sale for each quarter of the fiscal year is $900,000

Explanation of Solution

Particulars	1	2	3	4	Total
Budgeted unit sales	11,000	12,000	14,000	13,000	50,000
Selling price per unit	18	18	18	18	18
Total sales	198,000	216,000	252,000	234,000	900,000
Table (1)

2.

To determine

The expected cash collection for each quarter of the fiscal year

Introduction: Budget is the evaluation of the revenue and the expense which is expected incur in the specified period.

Answer to Problem 14E

Solution: The expected cash collection for each quarter of the fiscal year is $849,600

Explanation of Solution

Particulars	1	2	3	4	Total
Account receivable, beginning	$70,200				70,200
Quarter 1 sales	128,700	59,400			188,100
Quarter 2 sale		140,400	64,800		205,200
Quarter 3 sales			163,800	70,200	234,000
Quarter 4 sales				152,100	152,100
Total cash collection	198,900	199800	228,600	222,300	849,600
Table (2)

Working notes:

Calculate the total cash collection of Quarter 1.

$\begin{array}{c}\text{Cash}\text{collection}=\left(\text{Beginning}\text{account}\text{receivable}\right)+\text{65\%of}\text{sales}\text{in}\text{quarter1}\\ \text{=\$70,200+}\left(\$198,000\times 0.65\right)\\ =\$70,200+\$128,700\\ =\$198,900\end{array}$

Calculate the total cash collection of Quarter 2.

$\begin{array}{c}\text{Cash}\text{collection}=\left(\text{30\%of}\text{sales}\text{in}\text{quarter}\text{1}\right)+\text{65\%of}\text{sales}\text{in}\text{quarter2}\\ \text{=}\left(\text{\$198,000}\times 0.30\right)\text{+}\left(\$216,000\times 0.65\right)\\ =\$59,400+\$140,400\\ =\$199,800\end{array}$

Calculate the total cash collection of Quarter 3.

$\begin{array}{c}\text{Cash}\text{collection}=\left(\text{30\%of}\text{sales}\text{in}\text{quarter}2\right)+\text{65\%of}\text{sales}\text{in}\text{quarter3}\\ \text{=}\left(\$216,000\times 0.30\right)\text{+}\left(\$252,000\times 0.65\right)\\ =\$64,800+\$163,800\\ =\$228,600\end{array}$

Calculate the total cash collection of Quarter 4.

$\begin{array}{c}\text{Cash}\text{collection}=\left(\text{30\%of}\text{sales}\text{in}\text{quarter}3\right)+\text{65\%of}\text{sales}\text{in}\text{quarter}\text{4}\\ \text{=}\left(\$252,000\times 0.30\right)\text{+}\left(\$234,000\times 0.65\right)\\ =\$75,600+\$152,100\\ =\$227,700\end{array}$

Calculate the cash collection of quarter 1 sales in quarter 2,

$\begin{array}{c}\text{Cash}\text{colection}=\text{Sales}\times \text{30\%}\text{of}\text{sales}\\ =\$198,000\times 0.30\\ =59,400\end{array}$

Calculate the cash collection of quarter 2 sales in quarter 3,

$\begin{array}{c}\text{Cash}\text{colection}=\text{Sales}\times \text{30\%}\text{of}\text{sales}\\ =\$216,000\times 0.30\\ =\$64,800\end{array}$

Calculate the cash collection of quarter 3 sales in quarter 4,

$\begin{array}{c}\text{Cash}\text{colection}=\text{Sales}\times \text{30\%}\text{of}\text{sales}\\ =\$234,000\times 0.30\\ =\$70,200\end{array}$

3.

To determine

The required production in the units goods for the each quarter

Introduction: Budget is the evaluation of the revenue and the expense which is expected incur in the specified period.

Answer to Problem 14E

Solution: The required production in the units goods for the each quarter is $12,900

Explanation of Solution

Calculate the production budget of J.

	Particulars	1	2	3	4	Total
	Budgeted unit sales	11,000	12,000	14,000	13,000	50,000
Add:	Desired ending inventory(15% of next quarter sales)	1,800	2,100	1,950	1,850	1850
	Total units	12,800	14,100	15,950	14,850	51,850
Less:	Beginning inventory	1,650	1,800	2,100	1,950	1,850
	Required production	11,150	12,300	13,850	12,850	12,900
Table (3)