Milo Company manufactures beach umbrellas. The company is now preparing detailed
ID: 2555557 • Letter: M
Question
Milo Company manufactures beach umbrellas. The company is now preparing detailed budgets for the third quarter and has assembled the following information to assist in the budget preparation:
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.
Gilden costs $0.80 per metre. One-half of a month’s purchases of Gilden are paid for in the month of purchase; the remainder are paid for in the following month. The accounts payable on July 1 for purchases of Gilden during June will be $86,000.
Milo Company manufactures beach umbrellas. The company is now preparing detailed budgets for the third quarter and has assembled the following information to assist in the budget preparation:
Required: 1. Prepare a sales budget, by month and in total, for the third quarter. Also, prepare a schedule of expected cash collections, by month and in total, for the third quarter. MILO COMPANY Sales Budget July AugustSeptember Quarter Budgeted sales MILO COMPANY Schedule of Expected Cash Collections July August September Quarter Accounts receivable, June 30 luly August sales September sales Total cash collections 0 $ 0 S 0 S 2. Prepare a production budget for each of the months July to October. MILO COMPANY Production Budget for July-October July AugustSeptember October Total needsExplanation / Answer
SALES BUDGET JULY AUG SEP QUARTER OCT NOV Budgeted Sales units 40,000 80,000 60,000 180,000 30,000 20,000 Selling price per unit 12 12 12 12 12 12 Total Sales 480,000 960,000 720,000 2,160,000 360,000 240,000 EXPECTED CASH COLLECTIONS JULY AUG SEP QUARTER beginning Accounts receivable 273,000 273,000 July Month sales 144,000 312000 456,000 Aug month sales 288000 624000 912,000 Ssep month sales 216,000 216,000 Total Cash Collections 417,000 600,000 840,000 1,857,000 PRODUCTION BUDGET JULY AUG SEP QUARTER OCT NOV Budgeted Sales Units 40,000 80,000 60,000 180,000 30,000 20,000 Add: Desired Ending Finished inventory 12,000 9,000 4,500 4,500 3,000 Total Needs 52,000 89,000 64,500 184,500 33,000 Less: Beginning Finished Inventory 6,000 12,000 9,000 6,000 4,500 Required Production in units 46,000 77,000 55,500 178,500 28,500 RAW MATERIAL PURCHASE BUDGET JULY AUG SEP QUARTER OCT Budgeted Production 46,000 77,000 55,500 178,500 28,500 Rraw material per unit 4 4 4 4 4 Total Production needs 184,000 308,000 222,000 714,000 114,000 Add: Desired Ending Inventory 154,000 111,000 57,000 57,000 Total needs 338,000 419,000 279,000 771,000 Less: Beginning Inventory 92,000 154,000 111,000 92,000 Purchase Units 246,000 265,000 168,000 679,000 Cost price per unit 0.80 0.80 0.80 0.80 Budgeted Purchase in $ 196,800 212,000 134,400 543,200 EXPECTED CASH PAYMENTS July Aug Sep Quarter Beginning Accounts payable 86,000 86,000 July Month purchase 98400 98400 196,800 Aug month purchasses 106000 106000 212,000 Sep month purchases 67200 67,200 Total Cash disbursement 184,400 204,400 173,200 562,000