Milo Company manufactures beach umbrellas. The company is now preparing detailed budgets for the third quarter and has assembled the following information to assist in the budget preparation: a. The Marketing Department has estimated sales as follows for the remainder of the year (in units): July August September 40,000 October 80,000 November 60,000 December 30,000 20,000 20,000 The selling price of the beach umbrellas is $12 per unit. Sales in June were 35,000 units. b. 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% uncollectible 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 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 as follows: June 30 September 30 92,000 metres ? metres e. 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 $86,000. Required: 1. Prepare a sales budget, by month and in total, for the third quarter. Also, prepare a schedule of expected cash collections, by month and in total, for the third quarter. MILO COMPANY Sales Budget July August $ 480,000 $ 960,000 September $ 720,000 Quarter $2,160,000 Budgeted sales Quarter MILO COMPANY Schedule of Expected Cash Collections July August September Accounts receivable, June 30 July sales August sales September sales Total cash collections $ 0 $ 0 $ 0 $ 0 2. Prepare a production budget for each of the months July to October. MILO COMPANY Production Budget for July-October July August September October Total needs 3. Prepare a materials purchases budget for Gilden, by month and in total, for the third quarter. Also, prepare a schedule of expected cash payments for Gilden, by month and in total, for the third quarter. MILO COMPANY Materials Budget Month August July September Quarter Total needs (metres) MILO COMPANY Quarter Schedule of Expected Cash Payments July August September Accounts payable, June 30 July purchases August purchases September purchases Total cash payments $ 0 $ 0 $ 0 $ 0