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 36,000 October 76,009 November 56,009 December 26,000 16,000 16,000 The selling price of the beach umbrellas is 512 per unit. Sales in June were 31,000 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 84,000 metres 2 metres 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 84,000 metres 2 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 $82,000. 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 September Quarter $ 432.0001 5 912.0001 5 672.000 $2,016,000 Budgeted sales MILO COMPANY Schedule of Expected Cash Collections July August September Quarter Accounts receivable, June 30 $ 241,800 $ 241,800 July sales 129,600 280,800 410,400 August sales 273,600 592,800 866,400 September sales 201,600 201,600 Total cash collections $ 371,400 $ 554,400 $ 794,400 $1,720,200 2. Prepare a production budget for each of the months July to October. MILO COMPANY Production Budget for July October July August Actual sales (units) 36,000 76,000 PAdd: Desired ending inventory 11,400 8,400 Total needs 47,400 84,400 Deduct: Beginning inventory 5,400 11,400 Required production 42,000 73,000 September October 56,000 26,000 3,900 2,400 59,900 28,400 8,400 3,900 51,500 24,500 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. 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 MILO COMPANY Materials Budget Month July August September Quarter 168,000 292,000 206,000 2664,000 146,000 103,000 49,000 49,000 314,000 395,000 255,000 2.758,000 84,000 146,000 103.000 84,000 230,000 249.000 152.000 133,000 $ 184,000 5 199 2007 $ 121,600 $ 106,400 MILO COMPANY Schedule of Expected Cash Payments July August September Quarter Accounts payable, June 30 July purchases August purchases September purchases Total cash payments $ 0$ 0$ 0 $ 0