Milo Company manufactures beach umbrellas. The company is preparing detailed budgets for the third quarter and has gathered the following information to assist in 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 below.

	Julio	August	September	Third quarter
sales in units	30,000	70.000	50,000	150.000
Price by unit	12	12	12	12
sales in dollars	$360,000	$840,000	$600,000	$1,800,000

• All sales are on account. Milo offers a 3 percent discount when customers make credit sales payments 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 the sale

5% uncollectible

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

· The company maintains inventories of finished products equivalent to 15% of the following month's sales. This requirement will be met by the end of June.

· Each beach umbrella requires 4 feet of Gilden, a material that is sometimes difficult to acquire. Therefore, the company requires that Gilden's ending inventory equal 50% of the following month's production needs. Gilden's inventory 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 month's purchases from Gilden are paid for in the month of purchase; the rest is paid in the following month. The accounts payable balance on July 1 will be $76,000. This amount represents the unpaid balance of Gilden's purchases 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 as of 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 purchase budgets in feet and in dollars.
5. (5 points) Prepare a schedule of expected cash disbursements to Gilden for each month (July through September) and in total for the third quarter.