Milo Company manufactures beach umbrellas. The company is preparing detailed bud
ID: 2426364 • 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 $15 per unit.
July
33,000
October
23,000
August
76,000
November
9,500
September
45,000
December
10,000
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 $375,000.
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
78,900
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 $39,390.
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.
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 $15 per unit. July 33,000 October 23,000 August 76,000 November 9,500 September 45,000 December 10,000 ________________________________________ 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 $375,000. 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 78,900 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 $39,390. 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
Milo company 1a Sales Budget Sales Price per unit 15 Month Jun Jul Aug Sep Total 3rd Qtr Oct Nov Sales Units 33,000 76,000.00 45,000.00 154,000 23,000.00 9,500.00 Sales revenue 375,000 495,000 1,140,000 675,000 2,310,000 345,000 142,500 1b Expected cash Collection Collection of sales of June 112,500 243,750 243,750 Collection of sales of Jul 148,500 321,750 470,250 Collection of sales of Aug 342,000 741,000 1,083,000 Collection of sales of Sep 202,500 202,500 438,750.00 Total For Quarter 3 1,999,500 2 Production Budget Months Jun Jul Aug Sep Total 3rd Qtr Oct Nov Sales Units 33,000 76,000 45,000 23,000 9,500.00 Add Required Closing Stock of FG 11,400 6,750 3,450 1,425.00 Less Opening Stock in hand 4,950 11,400.00 6,750.00 3,450.00 1,425.00 Total Production Required in Units 39,450 71,350 41,700 20,975 3 Raw Material Budget Each unit requires 4 feet gilden Months Jun Jul Aug Sep Total 3rd Qtr Oct Units of Prodcution in Month 39,450 71,350 41,700 20,975.00 Direct materials required for production -Feet 157,800 285,400 166,800 610,000 83,900 Add ;Required ending inventory @50% of next months production reqd 142,700 83,400 41,950.00 Less ; Opening inventrory of Gilden 78,900 142,700 83,400 Total Gilden to be purchased -feet 221,600 226,100 125,350 573,050 3b cost of Gilden per feet 0.60 0.60 0.60 Cost Of purchase 132,960 135,660 75,210 343,830 Expected disbursement Expected disbursement monthwise 105,870 134,310 105,435 345,615