Milo Company manufactures beach umbrellas. The company is now preparing detailed budgets for the third quarter and
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 the budget preparation:
- The Marketing Department has estimated sales as follows for the remainder of the year (in units):
July | 40,000 | October | 30,000 | ||||
August | 80,000 | November | 20,000 | ||||
September | 60,000 | December | 20,000 | ||||
The selling price of the beach umbrellas is $12 per unit. Sales in June were 35,000 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 | 92,000 | 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 $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.
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.
Management Leading And Collaborating In The Competitive World
ISBN: 9780078137242
9th Edition
Authors: Thomas Bateman, Scott Snell