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Milo-Freeze Company manufactures and sells a product that has seasonal variations in demand, with peak sales coming in the third quarter. The following information concerns
Milo-Freeze Company manufactures and sells a product that has seasonal variations in demand, with peak sales coming in the third quarter. The following information concerns operations for Year 2- the coming year- and for the first two quarters of Year 3: a) The company's single product sells for $10 per unit. Budgeted sales in units for the next six quarters are as follows: Year 2 Quarter Year 3 Quarter 1 | 2 3 4 | Budgeted unit sales 40,000 60,000 100,000 50,000 70,000 80,000 b) Sales are collected in the following pattern: 75% in the quarter the sales are made, and the remaining 25% in the following quarter. On January 1, Year 2, the company's balance sheet showed $65,000 in accounts receivable, all of which will be collected by the end of first quarter. Bad debts are negligible and can be ignored. c) The company desires an ending inventory of finished units on hand at the end of each quarter equal to 30% of the budgeted sales for the next quarter. On December 31, Year 1, the company had 12,000 units on hand. Milo-Freeze Company Sales Budget For the year 2 Year 2 Quarter 3 4 Year 2 $ - $ - $ - $ 1 Budgeted unit sales Selling price per unit $ - 9 Total Sales 10 11 Percentage of sales collected in the period of the sale Percentage of sales collected in the period after the sale 0% 0% 13 Milo-Freeze Company Cash Collections Budget For the year NMON Percentage of sales collected in the period of the sale Percentage of sales collected in the period after the sale 0% 0% 8 9 10 | Year 2 Quarter 2 | 3 | 4 | Year 2 $ 1 - - $ - - $ 11 Accounts receivable, beginning Balance 12 First quarter sales 13 Second quarter sales 14 Third quarter sales 15 Fourth quarter sales 16 Total cash collections 17 - - $ . $ - $ - $ - $ - $
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