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:

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

July	40,500	October	30,500
August	91,000	November	17,000
September	60,000	December	17,500

The selling price of the beach umbrellas is $12 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 $480,000.

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	96,150	feet
September 30	?	feet

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 $52,890.

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

	July August September Quarter Budgeted sales

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

	July August September Quarter Total cash collections

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

	July August September October Required production in units

4&5 Calculate the quantity of Gilden (in feet) that needs to be purchased by month and in total, for the third quarter. Calculate the cost of the raw material (Gilden) purchases by month and in total, for the third quarter. (Round your Unit cost of raw materials to 2 decimal places.)

	July August September Quarter Total units of raw materials to be purchased Cost of raw materials to be purchased

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

	July August September Quarter Total cash disbursements

Answer 1

Milo Company
Sales
July	40500
August	91000
September	60000
October	30500
November	17000
December	17500
June Sales	$ 480,000.00
	Milo Company
	Sales Budget
	July	August	September	Quarter
Budgeted unit Sales	40500	91000	60000	191500
Selling Price per unit	$            12.00	$                12.00	$            12.00	$                12.00
Budgeted Sales	$ 486,000.00	$ 1,092,000.00	$ 720,000.00	$ 2,298,000.00
	Milo Company
	Schedule of Expected Cash collection
	July	August	September	Quarter
Accounts receivable June 30th	$ 312,000.00			$      312,000.00
July Sales	$ 145,800.00	$      315,900.00		$      461,700.00
August Sales		$      327,600.00	$ 709,800.00	$ 1,037,400.00
September Sales			$ 216,000.00	$      216,000.00
Total Cash Collectons	$ 457,800.00	$      643,500.00	$ 925,800.00	$ 2,027,100.00
	Milo Company
	Production Budget
	July	August	September	Quarter
Budgeted Unit sales	40500	91000	60000	191500
Ending Goods Inventory	13650	9000	4575	4575
Total Needs	54150	100000	64575	196075
Beginning Goods Inventory	6075	13650	9000	6075
Required Production	48075	86350	55575	190000
	Milo Company
	Direct Material Budget
	July	August	September	Quarter
Required Production	48075	86350	55575	190000
Gilden per unit(Feet)	4	4	4	4
Production needed	192300	345400	222300	760000
Ending Inventory	172700	111150	56950	56950
Total needed	365000	456550	279250	816950
Beginning Inventory	96150	172700	111150	96150
Material Needed	268850	283850	168100	720800
Cost Per feet	$               0.60	$                   0.60	$               0.60	$                   0.60
Total material cost	$ 161,310.00	$      170,310.00	$ 100,860.00	$      432,480.00
Working
October Required Production
Budgeted unit sales	30500
Ending goods Inventory	2550
Total Need	33050
Beginning Inventory	4575
Required Production	28475
	Milo Company
	Schedule of Expected Cash disbursement
	July	August	September	Quarter
Accounts Payable,June 30th	$    52,890.00			$        52,890.00
July Purchases	$    80,655.00	$        80,655.00		$      161,310.00
August Purchases		$        85,155.00	$    85,155.00	$      170,310.00
September Purchases			$    50,430.00	$        50,430.00
Total Cash Disbursements	$ 133,545.00	$      165,810.00	$ 135,585.00	$      434,940.00