Milo Company manufactures beach umbrellas. The company is preparing detailed bud
ID: 2549542 • 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): July August September 39,508 89,008 58,008 October November December 29,500 16,000 16,500 The selling price of the beach umbrellas is $10 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 Sales for June totaled $380,000. 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 93,850 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 $68,120. Required: 1. Calculate the estimated sales, by month and in total, for the third quarter. he expected cash collections, by month and in total, for the third quarter. 3. Calculate the estimated quantity of beach umbrellas that need to be produced in July, August, September, and October. 4. Calculate the quantity of Gilden (in feet) that needs to be purchased by month and in total, for the third quarter. 5. Calculate the cost of the raw material (Gilden) purchases by month and in total, for the third quarter. 6. Calculate the expected cash disbursements for raw material (Gilden) purchases, by month and in total, for the third quarter.Explanation / Answer
1) Sales budget july august sept quarter Estimated sale units 39,500 89,000 58,000 186,500 Selling price per unit 10 10 10 10 total sales 395000 890000 580000 1865000 2) Expected cash collection july august sept quarter From june sales (380,000*65%) 22800 22800 from july sales(395000*30%;65%) 118500 256750 375250 From aug sales (890,000*30%;65%) 267000 578500 845500 From sept sales (580,000*30%) 174000 174000 total cash collections 141300 523750 752500 1417550 3) production budget july august sept october Estimated sale units 39,500 89,000 58,000 29,500 Add: Ending inventory 13350 8700 4425 2400 total needs 52,850 97,700 62,425 31,900 less :opening inventory -5925 -13,350 -8,700 -4425 production required 46,925 84,350 53,725 27,475 4) july august sept Quarter 0ct production required 46,925 84,350 53,725 185,000 27,475 feet required per umbrella 4 4 4 4 4 production needs 187700 337400 214900 740000 109900 Add:Ending inventory 168700 107450 54950 54,950 total needs 356400 444850 269850 794950 less:Opening inventory -93850 -168,700 -107,450 -93,850 total materials purchased 262550 276150 162400 701100 5) cost of raw materials purchases july august sept Quarter total materals purchased 262550 276150 162400 701100 cost per feet $0.80 $0.80 $0.80 $0.80 Materials cost $210,040.00 $220,920.00 $129,920.00 $560,880.00 6) Cash disbursement july august sept Quarter accounts payable 68,120 68,120 From july sales (210040*1/2) $105,020.00 $105,020.00 $210,040.00 from aug sales (220920*1/2) $110,460.00 $110,460.00 220920 from sept sales (129,920*1/2) $64,960.00 64960 total cash disrbursement 173,140 215480 175420 564,040