Milo-Freeze Company manufactures and sells a product that has seasonal variations in demand with peak sales occurring in the third quarter (Q3) of each year. Assuming that the company is currently operating at the end of Year 1, the detailed information below displays estimates for operations in the upcoming Year 2 (next year) and also for the first two quarters (Q1 and Q2) of the following Year 3.

1. The companys single product sells for $10 per unit. Budgeted (estimated) sales in units for the next six quarters are as follows:

	Year 2				Year 3
	Q1	Q2	Q3	Q4	Q1	Q2
Budgeted unit sales	40,000	60,000	100,000	50,000	70,000	80,000

1. 2. Sales revenues 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 of Year 2, the companys 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.
   3. To maintain adequate product stock, 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 of Year 1, the company had 12,000 units on hand.
2. 4. Six pounds of raw materials are required to produce one unit of product. The company requires an ending inventory of raw materials on hand at the end of each quarter equal to 10% of the production needs for the following quarter. On December 31 of Year 1, the company had 23,000 pounds of raw materials on hand.
3. 5. The raw material costs $0.80 per pound. Purchases of raw material are paid for in the following pattern: 60% paid in the quarter the purchases are made, and the remaining 40% paid in the following quarter. On January 1 of Year 2, the companys balance sheet showed $81,500 in Accounts Payable for raw material purchases, all of which will be paid in the first quarter.

Work Requirements

Prepare the following budget for the year, showing both quarterly and total figures:

1. Sales budget
2. Cash collections budget
3. Production budget
4. Direct materials budget
5. Cash payments schedule for purchases of materials.