Problem 8-30 Integration of the Sales, Production, and Direct Materials Budgets
ID: 2558311 • Letter: P
Question
Problem 8-30 Integration of the Sales, Production, and Direct Materials Budgets [LO8-2, LO8-3, LO8-4]
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: The Marketing Department has estimated sales as follows for the remainder of the year (in units): July 33,500 October 23,500 August 77,000 November 10,000 September 46,000 December 10,500 The selling price of the beach umbrellas is $10 per unit. 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 $260,000. 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. 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 80,050 feet September 30 ? feet 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 $53,720.
Required: 1. Calculate the estimated sales, by month and in total, for the third quarter. 2. Calculate the 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
Milo Company Sales July 33500 August 77000 September 46000 October 23500 November 10000 December 10500 June Sales $ 260,000.00 Milo Company Sales Budget July August September Quarter Budgeted unit Sales 33500 77000 46000 156500 Selling Price per unit $ 10.00 $ 10.00 $ 10.00 $ 10.00 Budgeted Sales $ 335,000.00 $ 770,000.00 $ 460,000.00 $ 1,565,000.00 Milo Company Schedule of Expected Cash collection July August September Quarter Accounts receivable June 30th($260000*65%) $ 169,000.00 $ 169,000.00 July Sales=($335000*35%) in July and ($335000*65%) in August $ 100,500.00 $ 217,750.00 $ 318,250.00 August Sales=($770000*30%) in August and ($770000*65%) in September $ 231,000.00 $ 500,500.00 $ 731,500.00 September Sales=($460000*30%) in September $ 138,000.00 $ 138,000.00 Total Cash Collectons $ 269,500.00 $ 448,750.00 $ 638,500.00 $ 1,356,750.00 Milo Company Production Budget July August September Quarter October Budgeted Unit sales 33500 77000 46000 156500 23500 Ending Goods Inventory=(77000*15%) in July,(46000*15%) in August,(23500*15%) in September 11550 6900 3525 3525 1500 Total Needs 45050 83900 49525 160025 25000 Beginning Goods Inventory=(33500*15%) in July 5025 11550 6900 5025 3525 Required Production 40025 72350 42625 155000 21475 Milo Company Direct Material Budget July August September Quarter October Required Production 40025 72350 42625 155000 21475 Gilden per unit(Feet) 4 4 4 4 4 Production needed=(A) 160100 289400 170500 620000 85900 Ending Inventory=(289400*50%) in July,(170500*50%) in September,(85900*50%)=(B) 144700 85250 42950 42950 Total needed(C )=(A)+(B) 304800 374650 213450 662950 Beginning Inventory=(D) 80050 144700 85250 80050 Material Needed=(E )=(C )-(D) 224750 229950 128200 582900 Cost Per feet=(F) $ 0.80 $ 0.80 $ 0.80 $ 0.80 Total material cost=( E )*(F) $ 179,800.00 $ 183,960.00 $ 102,560.00 $ 466,320.00 Working October Required Production Budgeted unit sales 23500 Ending goods Inventory 1500 Total Need 25000 Beginning Inventory 3525 Required Production 21475 Milo Company Schedule of Expected Cash disbursement July August September Quarter Accounts Payable,June 30th $ 53,720.00 $ 53,720.00 July Purchases $ 89,900.00 $ 89,900.00 $ 179,800.00 August Purchases $ 91,980.00 $ 91,980.00 $ 183,960.00 September Purchases $ 51,280.00 $ 51,280.00 Total Cash Disbursements $ 143,620.00 $ 181,880.00 $ 143,260.00 $ 468,760.00