Milo Company manufactures beach umbrellas. The company is preparing detailed bud
ID: 2589788 • 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:
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.
a. The Marketing Department has estimated sales as follows for the remainder of the year (in units): July 40,000 October 30,000 August 90,000 November 16,500 September 59,000 December 17,000 The selling price of the beach umbrellas is $11 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 $429,000. 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 95,000 feet September 30 ? feet e. Gilden costs $0.60 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 $51,990.Explanation / Answer
1 Milo Company Sales Budget July August September Total Budgeted units sales 40,000 90,000 59,000 189,000 Selling price per unit $11 $11 $11 Total sales $440,000 $990,000 $649,000 $2,079,000 2 Milo Company Schedule of expected cash collection July August September Total Beginning accounts receivable $278,850 $0 $0 $278,850 July $132,000 $286,000 0 $418,000 August $0 $297,000 $643,500 $940,500 September $0 $0 $194,700 $194,700 Total cash collections $410,850 $583,000 $838,200 $1,832,050 3 Milo Company Production budget July August September October Total Budgeted units sales 40,000 90,000 59,000 30,000 219,000 Add: Ending Units 13,500 8,850 4,500 2,475 29,325 Total needs 53,500 98,850 63,500 32,475 248,325 Less: Beginning Units 6,000 13,500 8,850 4,500 32,850 Required production in units 47,500 85,350 54,650 27,975 215,475 4 Milo Company Purchase Budget July August September Total October Required Production 47,500 85,350 54,650 187,500 27,975 Gilden Per Unit (Feet) 4 4 4 4 Production needed 190,000 341,400 218,600 111,900 Ending Inventory 170,700 109,300 55,950 Total Needed 360,700 450,700 274,550 Beginning Inventory 95,000 170,700 109,300 Meterial Needed 265,700 280,000 165,250 Cost per Unit $0.60 $0.60 $0.60 Total Material Cost $159,420 $168,000 $99,150