Milo Company manufactures beach umbrellas. The company is preparing detailed bud
ID: 2471509 • 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 $11 per unit.
July 34,000
October 24,000
August 78,000
November 10,500
September 47,000
December 11,000
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 $297,000.
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 81,200 feet
September 30 ? 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 $54,920.
Required: 1-a. Prepare a sales budget, by month and in total, for the third quarter.
Prepare a schedule of expected cash collections, by month and in total, for the third quart
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.
Prepare a schedule of expected cash disbursements for Gilden,, by month and in total, for the third quarter.
1b.Prepare a schedule of expected cash collections, by month and in total, for the third quart
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.
Explanation / Answer
1a, 1b
Data for June and october has been provided for your better understanding
June July August September October Total quarter Sale 27000 34000 78000 47000 24000 159000 Sale Value at $ 11 per unit 297000 374000 858000 517000 264000 1749000 Collection - Current month sale = 30 % of sale 89100 112200 257400 155100 79200 524700 Collection - Previous month sale 0 65 % of previous month sale - 193050 243100 557700 336050 993850 Total collection per month 305250 500500 712800 415250 1518550 Uncollectible = 5 % of current month sale 14850 18700 42900 25850 13200 87450