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 32,000 October 72,000 November 52,000 December 22,000 12,000 12,000 The selling price of the beach umbrellas is $12 per unit. Sales in June were 27,000 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 76,000 metres ? etre 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 $78,000. 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. Answer is complete and correct. MILO COMPANY Sales Budget July August September $ 384,000$ 864,000$ 624,000 Quarter Budgeted sales 1,872,000 Answer is complete and correct. MILO COMPANY Schedule of Expected Cash Collections July August September Accounts receivable, June 30 $ 210,600 July sales 115,200 249,600 August sales 259,200 561,600 September sales 187,200 Quarter $ 210,600 364,800 820,800 187,200 $ 1,583,400 Total cash collections $ 325,800 $ 508,800 748,800 2. Prepare a production budget for each of the months July to October Answer is complete and correct. MILO COMPANY Production Budget for July-October July August Budgeted sales (units) 32,000 72,000 Add: Desired ending inventory 10,800 7,800 Total needs 42,800 79,800 Deduct: Beginning inventory 4,800 10,800 Required production 38,000 69,000 September 52,000 3,300 55,300 7,800 47,500 October 22,000 1.800 23,800 3,300 20,500 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. X Answer is not complete. MILO COMPANY Materials Budget Month August September Quarter Production needs (meters) Add: Desired ending inventory (metres) Total needs (metres) July 38,000 X 4 X 152,000 X
