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Crydon Inc. manufactures an advanced swim fin for scuba divers. Management is now prepar- ing detailed budgets for the third quarter, July through September, and
Crydon Inc. manufactures an advanced swim fin for scuba divers. Management is now prepar- ing detailed budgets for the third quarter, July through September, and has assembled the following information to assist in preparing the budget: a. The Marketing Department has estimated sales as follows for the remainder of the year (in pairs of swim fins): July 6.000 August 7000 September 5000 October 4000 November 3000 December 3000 The selling price of the swim fins is $50 per pair. b. All sales are on account. Based on past experience, sales are expected to be collected in the following pattern: 40% in the month of sale 50% in the month following sale 10% uncollectie The beginning accounts receivable balance (excluding uncollectible amounts) on July 1 will be $130,000. The company maintains finished goods inventories equal to 10% of the following month's sales. The inventory of finished goods on July 1 will be 600 pairs. d. Each pair of swim fins requires 2 pounds of grelco compound. To prevent shortages, the company would like the inventory of grelco compound on hand at the end of cach month to be equal to 20% of the following month's production needs. The inventory of grelco compound on hand on July 1 will be 2,440 kilograms. Grelco compound costs $2.50 per kilogram. Crydon pays for 60% of its purchases in the month of purchase the remainder is paid for in the following month. The accounts pay- able balance for grelco compound purchases will be $11.400 on July 1. Required: 1. Prepare a sales budget, by month and in total, for the third quarter. (Show your budget in both pairs of swim fins and dollars.) Also prepare a schedule of expected cash collections, by month and in total, for the third quarter. 2. Prepare a production budget for each of the months July through October. 3. Prepare a direct materials budget for grelco compound, by month and in total, for the third quarter. Also prepare a schedule of expected cash disbursements for grelco com- pound, by month and in total for the third quarter. C
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