Milo Company manufactures beach umbrellas. The company is preparing detailed bud
ID: 2419961 • Letter: M
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): The selling price of the beach umbrellas is $12 per unit. July 37,500 October 27,500 August 85,000 November 14,000 September 54,000 December 14,500 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 Sales for June totaled $408,000. c. The company maintains finished goods inventories equal to 15% of the following month’s sales. This requirement will be met at the end of June. d. Each beach umbrella requires 4 feet of Gilden, a material that is sometimes hard to acquire. Therefore, the company requires that the ending inventory of Gilden be equal to 50% of the following month’s production needs. The inventory of Gilden on hand at the beginning and end of the quarter will be: June 30 89,250 feet September 30 ? feet e. Gilden costs $0.60 per foot. One-half of a month’s purchases of Gilden is paid for in the month of purchase; the remainder is paid for in the following month. The accounts payable on July 1 for purchases of Gilden during June will be $47,490. Required: 1-a. Prepare a sales budget, by month and in total, for the third quarter. 1-b. Prepare a schedule of expected cash collections, by month and in total, for the third quarter. 2. Prepare a production budget for each of the months July–October. 3-a. Prepare a direct materials budget for Gilden, by month and in total, for the third quarter. (Round your Unit cost of raw materials to 2 decimal places.) 3-b. Prepare a schedule of expected cash disbursements for Gilden, by month and in total, for the third quarter.
Explanation / Answer
1-a. sales budget, by month and in total, for the third quarter. third quarter represents july august september
1-b.A schedule of expected cash collections, by month and in total, for the third quarter
june sales-65%
408000(given)*65%=265200
July sales-35%
450000(table-1a)*35%=157500
july sales -65%
450000*65% =292500
August sales-35%
1020000*35%=357000
August sales-65%
1020000*65%=663000
September sales-35%
648000*35%=226800
2. production budget for each of the months July–October
Sales
(A)
Closing Stock=15%of following month sales
(B)
Opening Stock
(C)
production
=A+B-C
3-a. Direct materials budget for Gilden, by month and in total,
80350*4=321400
3-b. schedule of expected cash disbursements for Gilden, by month and in total,
June-47490
July-107100*50%=53550
July-107100*50%=53550
August =192840*50%=96420
August =192840*50%=96420
September-120060*50%=60030
Month units sold ( A) price per unit(B) Amount=A*B july 37500 12 4,50,000 August 85000 12 10,20,000 September 54000 12 6,48,000 Total Sales 21,18,000