Milo Company manufactures beach umbrellas. The company is preparing detailed bud
ID: 2433487 • 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 August September 50,000 December 10,000 30,000 October 70,000 November 20,000 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 $300,000 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 September 30? 72,000 feet feet e. Gilden costs $0.80 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 $76,000 Required 1-a. Prepare a sales budget, by month and in total, for the third quarter July August September Quarter Budgeted units sales Selling price per unit Budgeted sales 1-b. Prepare a schedule of expected cash collections, by month and in total, for the third quarter. Milo Company Schedule of Expected Cash Collections July AugustSeptember Quarter Accounts receivable, June 30 July sales August sales September sales Total cash collectionsExplanation / Answer
1-a.
July
August
September
Quarter
Budgeted units sales
30,000
70,000
50,000
150,000
Selling price per unit
$ 12
$ 12
$ 12
$ 12
Budgeted sales
$ 360,000
$ 840,000
$ 600,000
$ 1,800,000
1-b.
Milo Company
Schedule of Expected Cash Collection
July
August
September
Quarter
Accounts receivable, June 30
$ 195,000
$ 195,000
July sales
$ 108,000
$ 234,000
$ 342,000
August sales
$ 252,000
$ 546,000
$ 798,000
September sales
$ 180,000
$ 180,000
Total cash collection
$ 303,000
$ 486,000
$ 726,000
$ 1,515,000
2.
Milo Company
Production Budget
July
August
September
October
Budgeted unit sales
30,000
70,000
50,000
20,000
Add: Ending finished goods inventory
10,500
7,500
3,000
1,500
Total needs
40,500
77,500
53,000
21,500
Less: Beginning finished goods inventory
4,500
10,500
7,500
3,000
Required production in units
36,000
67,000
45,500
18,500
3-a.
Milo Company
Direct Material Budget
July
August
September
Quarter
Required production in units of finished goods
36,000
67,000
45,500
148,500
Units of raw materials needed per units of finished goods(in ft)
4
4
4
4
Units of raw materials needed to meet production(in ft)
144,000
268,000
182,000
594,000
Add: Ending raw materials inventory
33,500
22,750
37,000
37,000
Total units of raw materials needed
177,500
290,750
219,000
631,000
Less: Beginning raw materials inventory
72,000
33,500
22,750
72,000
Units of raw material to be purchased
105,500
257,250
196,250
559,000
Unit cost of raw materials (in ft)
$0.80
$0.80
$0.80
$0.80
Cost of raw material to be purchased
$ 84,400
$ 205,800
$ 157,000
$ 447,200
3-b.
Milo Company
Schedule of Expected Cash Disbursement
July
August
September
Quarter
Accounts payable, June 30
$76,000
$76,000
July purchases
$42,200
$42,200
$84,400
August Purchases
$102,900
$102,900
$205,800
September Purchases
$78,500
$78,500
Total cash Disbursement
$118,200
$145,100
$181,400
$444,700
July
August
September
Quarter
Budgeted units sales
30,000
70,000
50,000
150,000
Selling price per unit
$ 12
$ 12
$ 12
$ 12
Budgeted sales
$ 360,000
$ 840,000
$ 600,000
$ 1,800,000