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):
July48,000October38,000August88,000November28,000September68,000December28,000
The selling price of the beach umbrellas is $12 per unit. Sales in June were 43,000 units.
- All sales are on account. On the basis of past experience, sales are collected in the following pattern:
30%in the month of sale65%in the month following sale5%uncollectible
- 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 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 30108,000metresSeptember 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 $94,000.
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.
2.
Prepare a production budget for each of the months July to October.
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.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started