EXERCISE $7-2$

Preparing Sales and Production Budgets $[$LO$2-$ CC$6,7]$

The marketing department of Kyle Corporation has submitted the following sales forecast for the upcoming fiscal year:

The selling price of the company's product is $$20$ per unit. Management expects to collect $65\%$ of sales in the quarter in which the sales are made and $30\%$ in the following quarter; $5\%$ of sales are expected to be uncollectible. The beginning balance of accounts receivable, all of which are expected to be collected in the first quarter, is $$80,500.$

The company expects to start the first quarter with $2,000$ 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 $2,250$ units.

Required:

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

Prepare the company's production budget for the upcoming fiscal year.