Milo Company manufactures beach umbrellas. The company is preparing detailed bud

Question

Milo Company manufactures beach umbrellas. The company is preparing detailed budgets for the third quarter and has assembled the following information to assist in the budget preparation: a. The Marketing Department has estimated sales as follows for the remainder of the year (in units): July August September 49,000 December 12,000 35,000 October 25,000 80,000 November 11,500 The selling price of the beach umbrellas is $13 per unit. b. All sales are on account. Based on past experience, sales are collected in the following pattern: 30% in the month of sale 65% in the month following sale 5% uncollectible

Explanation / Answer

Calculation of estimated sales July August September Total Sales During the Month (in units) (A) 35000 80000 49000 164000 Selling price per unit (B) $13 13 13 Estimated Sales (A*B)($) 455000 1040000 637000 2132000 Calculation of expected cash collection June July August September Total Estimated Sale ($) (A) 377000 455000 1040000 637000 Cash Collectiion 30% in the month of sale (A*30%) 136500 312000 191100 639600 65% in the next month of sale 245050 295750 676000 1216800 Total 381550 607750 867100 1856400 Calculation of estimated quantity to be produced July August September October Sales During the Month (A) 35000 80000 49000 25000 Add: Closing Stock (15% of next month) 12000 7350 3750 1725 Less: Opening Stock 5250 12000 7350 3750 Required Production 41750 75350 45400 22975 Quantity of Gliden required July August September Total Gliden Required for current month production 167000 301400 181600 650000 Add: Closing Stock 50% of next month requirement 150700 61744 11487.5 223931.5 Less: Opening Stock 83500 150700 61744 295944 Direct Material Required (in feet) 234200 212444 131343.5 577987.5 Calculation of Current Month Requirement July August September Production Requirement(A) 41750 75350 45400 No of units req to produce one unit (B) 4 4 4 Required for current month production (A*B) 167000 301400 181600 5. Cost of raw material July August September Total Direct Material Required (in feet) 234200 212444 131343.5 577987.5 Cost per foot 0.6 0.6 0.6 Total cost 140520 127466.4 78806.1 346792.5

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