Milo Company manufactures beach umbrellas. The company is 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 (in units) as follows for the remainder of the year:

July 30,000 October 20,000

August... 70,000 November 10,000

September. 50,000 December 10,000

The sales budgets for the third quarter of the year are reported as follows.

	July	August	September	Third Quarter
Sales in units	30,000	70,000	50,000	150,000
Price per unit	12	12	12	12
Sales in dollars	$360,000	$840,000	$600,000	$1,800,000

• All sales are on account. Milo provides a 3 percent discount when customers make payments of credit sales in the month of sale. Based on past experience, sales are collected in the following pattern:

30% in the month of sale

65% in the month following sale

5% uncollectible

Sales for June totaled $300,000. Uncollectible credit sales will be written off in the second month following the month of sale. For example, uncollectible balances from credit sales in July will be written off in September.

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 feet of Gilden, a material that is sometimes hard to acquire. Therefore, the company requires that the ending inventory of Gilden 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:

June 30 72,000 feet

September ? feet

• Gilden costs $0.80 per foot. Forty percent of a months purchases of Gilden are paid for in the month of purchase; the remainder is paid for in the following month. The balance of the accounts payable on July 1 will be $76,000. This amount represents the unpaid balance for purchases of Gilden during June that would be paid in full in July.

Required:

1. (6 points) Prepare a schedule of expected cash collections for each month (July to September) and in total for the third quarter.
2. (2 points) Determine the balance of accounts receivable on September 30.
3. (6 points) Prepare a production budget for each month (July to September) and in total for the third quarter.
4. (6 points) Prepare a direct materials purchase budget for Gilden for each month (July to September) and in total for the third quarter. Show the purchase budgets in feet and in dollars.
5. (5 points) Prepare a schedule of expected cash disbursements for Gilden for each month (July to September) and in total for the third quarter.