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 44,000 October 84,000 November 64,000 December 34,000 24,000 24,000 The selling price of the beach umbrellas is $12 per unit. Sales in June were 39,000 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 30 100,000 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 $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. 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. Answer complete and correct. MILO COMPANY Sales Budget July August $ $ 528,000 1,008,000 September Quarter $ 2,304,000 Budgeted sales $ 768,000 Answer is complete and correct. Quarter MILO COMPANY Schedule of Expected Cash Collections July August September Accounts receivable, June 30 $ 304,200 July sales 158,400 343,200 August sales 302,400 655,200 September sales 230,400 $ 304,200 501,600 957,600 230,400 $ 1,993,800 Total cash collections $ 462,600 $ 645,600 $ 885,600 2. Prepare a production budget for each of the months July to October. Answer is complete but not entirely correct. MILO COMPANY Production Budget for July-October July August Budgeted sales (units) 44,000 84,000 Add: Desired ending inventory 12,600 9,600 Total needs 56,600 93,600 Deduct: Beginning inventory 5,850 X 12,600 Required production 50,750 X 81,000 September 64,000 5,100 69,100 9,600 59,500 October 34,000 3,600 37,600 5,100 32,500 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. Answer is complete but not entirely correct. MILO COMPANY Materials Budget Month July August September Quarter 226,400 X 374,400 276,400 X 877,200 X 187,200 X 138,200 X 75,200 X 400,600 413,600 X 512,600 351,600 1,277,800 100,000 187,200 X 138,200 x 425,400 313,600 X 325,400 x 213,400 x 852,400 X $ 250,880 X $ 260,320 X $ 170,720 X $ 681,920 X Production needs (meters) Add: Desired ending inventory (metres) Total needs (metres) Deduct: Beginning inventory (metres) Raw materials to be purchased (meters) Cost of raw materials to be purchased oo Ooo Answer is complete but not entirely correct. MILO COMPANY Schedule of Expected Cash Payments July August September Quarter Accounts payable, June 30 $ 90,000 $ 90,000 July purchases 125,440 X 125,440 X 250,880 August purchases 130,160 X 130,160 X 260,320 September purchases 85,360 85,360 Total cash payments $ 215,440 $ 255,600 $ 215,520 $ 686,560