In order for a company to be successful it has to create good budgets and follow the budgets in order to ensure that it has the money available based on collections of credit sales to pay for the raw materials and labour for products that will be sold.

a) Prepare a sales budget, by month and in total, for the third quarter. Your budget should be provided both in number of units expected to be sold and the total sales dollars.

b) Prepare a schedule of expected cash collections, by month and in total for the third quarter.

c) Prepare a production budget for the months of July, August, September and October. Your budget should be by month.

d) Prepare a materials purchses budget for the company, by month and in total for the third quarter.

e) Prepare a schedule of expected cash payments for the company by month and in total for the third quarter.

Sales (in units)

July: 30,000

August: 70,000

September: 50,000

October: 20,000

November: 10,000

December: 10,000

The selling price of the beach umbrella is $12 per unit. Sales in June were 25,000 units.

All sales are on account. On the basis of past experience, sales are collected in the following pattern:

- 30% in the month of sale

- 65% in the month following sale

- 5% uncollected

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 four metres of Gilden, a material that is sometimes hard to get. Therefore, the company requires that the inventory of Gilden on hand at the end of each month 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: 72,000 metres

- September 30: ? metres

Gilden costs $0.80 per metre. One-half of a month's purchases of Gilden are paid for in the month of purchase; the remainder are paid for in the following month. The accounts payable on July 1 for purchases of Gilden during June will be $76,000.