Question
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
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:
- The Marketing Department has estimated sales as follows for the remainder of the year (in units):
| July | 44,000 | October | 34,000 | ||||
| August | 84,000 | November | 24,000 | ||||
| September | 64,000 | December | 24,000 | ||||
The selling price of the beach umbrellas is $12 per unit. Sales in June were 39,000 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 | % | uncollectible |
- The company maintains finished goods inventories equal to 15% of the following months sales. This requirement will be met at the end of June.
- 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 months production needs. The inventory of Gilden on hand at the beginning and end of the quarter will be as follows:
| June 30 | 100,000 | metres |
| September 30 | ? | metres |
- Gilden costs $0.80 per metre. One-half of a months 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 $90,000.
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.
| July | August | September | Quarter | |
| Budgeted sales |
| July | August | September | Quarter | |
| Accounts Receivable, June 30 | ||||
| July Sales | ||||
| August Sales | ||||
| September sales | ||||
| Total cash collections | $ | $ | $ | $ |
2. Prepare a production budget for each of the months July to October.
| 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.
| July | August | September | Quarter | |
| Total needs (metres) | ||||
| Schedule of Expected Cash Payments | July | August | September | Quarter |
| Accounts Payable, June 30 | ||||
| July purchases | ||||
| August purchases | ||||
| September purchases | ||||
| Total cash payments | $ | $ | $ | $ |
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Accounting For Governments From Budget To Audit How Governments Plan Raise Spend And Then Account For Their Use Of Citizens Money In The 21st Century
Authors: Michael Parry, Jesse Hughes
1st Edition
1092763112, 978-1092763110
