Question

In: Accounting

The Marketing Department has estimated sales as follows for the remainder of the year (in units):...

  1. The Marketing Department has estimated sales as follows for the remainder of the year (in units):

July 34,000 October 24,000
August 78,000 November 10,500
September 47,000 December 11,000

The selling price of the beach umbrellas is $11 per unit.

  1. 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 $297,000.

  1. 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.

  2. 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 81,200 feet
September 30 ? feet

  1. 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 $54,920.

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.

Solutions

Expert Solution

1. Calculate the estimated sales, by month and in total, for the third quarter.

July August September Quarter
Budgeted unit sales 34000 78000 47000 159000
Selling price per unit $11 $11 $11 $11
Budgeted sales $374000 $858000 $517000 $1749000

2. Calculate the expected cash collections, by month and in total, for the third quarter.

July August September Quarter
Accounts receivable, June 30 (297000*65%)= $193050 - - $193050
July sales (374000*30%)= 112200 (374000*65%)= 243100 - 355300
August sales - (858000*30%)= 257400 (858000*65%)= 557700 815100
September sales - - (517000*30%)= 155100 155100
Total cash collections $305250 $500500 $712800 $1518550

3. Calculate the estimated quantity of beach umbrellas that need to be produced in July, August, September, and October.

July August September October
Budgeted unit sales 34000 78000 47000 24000
Add: Desired ending inventory 11700 7050 3600 1575
Total needs 45700 85050 50600 25575
Less: Beginning inventory (5100) (11700) (7050) (3600)
Required productions in units 40600 73350 43550 21975

Calculation of Ending inventory

July= 78000*15%= 11700

August= 47000*15%= 7050

September= 24000*15%= 3600

October= 10500*15%= 1575

Calculation of Beginning inventory

July= 34000*15%= 5100

4. Calculate the quantity of Gilden (in feet) that needs to be purchased by month and in total, for the third quarter.

July August September Quarter
Required production in units 40600 73350 43550 157500
Units of raw materials needed per unit 4 4 4 4
Units of raw materials needed to meet production 162400 293400 174200 630000
Add: Desired ending raw materials inventory 146700 87100 43950 43950
Total units of raw materials needed 309100 380500 218150 673950
Less: Beginning raw materials inventory (81200) (146700) (87100) (81200)
Units of raw materials to be purchased 227900 233800 131050 592750

Calculation of Desired ending raw materials inventory

July= 293400*50%= 146700

August= 174200*50%= 87100

September= 21975*4*50%= 43950

5. Calculate the cost of the raw material (Gilden) purchases by month and in total, for the third quarter.

July August September Quarter
Units of raw materials to be purchased 227900 233800 131050 592750
Unit cost of raw materials $0.80 $0.80 $0.80 $0.80
Cost of raw materials to be purchased $182320 $187040 $104840 $474200

6. Calculate the expected cash disbursements for raw material (Gilden) purchases, by month and in total, for the third quarter.

July August September Quarter
Accounts payable, June 30 $54920 - - $54920
July purchases (182320*1/2)= 91160 (182320*1/2)= 91160 - 182320
August purchases - (187040*1/2)= 93520 (187040*1/2)= 93520 187040
September purchases - - (104840*1/2)= 52420 52420
Total cash disbursements $146080 $184680 $145940 $476700

NOTE:- For any problem regarding the answer please ask in the comment section.

ekkarill92 answered 2 years ago
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