Milo Company manufactures beach umbrellas. The company is preparing detailed bud
ID: 2561087 • 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): 34.500 October 24,588 79,808 November 11,8e8 September 48,8 December 11,588 August The selling price of the beach umbrellas is $12 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 $336.000. 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 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 3e September 38 82,358 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 $56,120. Requlrec 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 quarterExplanation / Answer
1 calculation of estimated sales , by month and in total for the 3rd Quarter particulars July August September Total Estimates sales in units 34500 79000 48000 161500 price per unit $12 $12 $12 $12 Sales $ 4,14,000.00 $ 9,48,000.00 $ 5,76,000.00 $ 19,38,000.00 2 Expected Cash Collections by month & total for 3rd Quarter particulars July August September Total Sales $ 4,14,000.00 $ 9,48,000.00 $ 5,76,000.00 $ 19,38,000.00 cash received in month of sale 35% $ 1,44,900.00 $ 3,31,800.00 $ 2,01,600.00 $ 6,78,300.00 414000*0.35 948000*0.35 576000*0.35 cash received in following month 65% $ 2,18,400.00 $ 2,69,100.00 $ 6,16,200.00 $ 11,03,700.00 336000*.65 414000*0.65 948000*0.65 Cash collected $ 3,63,300.00 $ 6,00,900.00 $ 8,17,800.00 $ 17,82,000.00 3 Estimated production need to be produced by month & Quarter particulars July August September Total Sales in units 34500 79000 48000 161500 Add: Closing Stock (15% of next month sales) 11850 7200 3675 3675 79000*0.15 48000*0.15 24500*0.15 46350 86200 51675 165175 less: Opening Stock 4200 11850 7200 4200 336000/12 *0.15 Units need to be produced 42150 74350 44475 160975 4 Quantity of Gliden need to be Purchased by month and total for 3 rd quarter particulars July August September Total Units need to be produced 42150 74350 44475 160975 Gliden needed 4 feet per Unit 4 4 4 4 Gliden needed in feets 168600 297400 177900 643900 Add: closing stock (50% following month) 148700 88950 37900 37900 317300 386350 215800 681800 Less: opening Stock 82350 148700 88950 82350 Purchase of raw materials in feet 234950 237650 126850 599450 October month production =24500+15%*11000 -7200 =18950 Closing Stock gliden for Sepetember =18950*4*50% =37900 5 Cost of the raw materials Purchased by month and total for the quarter particulars July August September Total Purchase of rw materials in Feets 234950 237650 126850 599450 Raw material price per feet $0.80 $0.80 $0.80 $0.80 casot of raw meterials Purchased $ 1,87,960.00 $ 1,90,120.00 $ 1,01,480.00 $ 4,79,560.00