Problem 8 30 Integration of the Sales, Production, and Direct Materials Budgets 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 as follows for the remainder of the year (in units) July 33,500 October 23,500 August 77,000 November 10,000 September 46,000 December 10,500 The selling price of the beach umbrellas is $10 per unit All sales are on account 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 $260,000 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 80,050 feet September 30 feet Gilden costs $0 80 per foot One half of a months purchases of Gilden is paid for in the month of purchase the remainder is paid for in the following month The accounts payable on July 1 for purchases of Gilden during June will be $53,720 Required 1 Calculate the estimated sales, by month and in total, for the third quarter 2 Calculate the expected cash collections, by month and in total, for the third quarter 3 Calculate the estimated quantity of beach umbrellas that need to be produced in July, August, September, and October 4 Calculate the quantity of Gilden (in feet) that needs to be purchased by month and in total, for the third quarter 5 Calculate the cost of the raw material (Gilden) purchases by month and in total, for the third quarter 6 Calculate the expected cash disbursements for raw material (Gilden) purchases, by month and in total, for the third quarter

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Problem 8-30 Integration of the Sales, Production, and Direct Materials Budgets Milo Company manufactures beach umbrellas. The company is preparing detailed budgets for the third

Problem 8-30 Integration of the Sales, Production, and Direct Materials Budgets

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 as follows for the remainder of the year (in units):


July	33,500	October	23,500
August	77,000	November	10,000
September	46,000	December	10,500

The selling price of the beach umbrellas is $10 per unit.

All sales are on account. 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 $260,000.

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	80,050	feet
September 30	?	feet

Gilden costs $0.80 per foot. One-half of a months purchases of Gilden is paid for in the month of purchase; the remainder is paid for in the following month. The accounts payable on July 1 for purchases of Gilden during June will be $53,720.

Required:

1. Calculate the estimated sales, by month and in total, for the third quarter.

2. Calculate the expected cash collections, by month and in total, for the third quarter.

3. Calculate the estimated quantity of beach umbrellas that need to be produced in July, August, September, and October.

4. Calculate the quantity of Gilden (in feet) that needs to be purchased by month and in total, for the third quarter.

5. Calculate the cost of the raw material (Gilden) purchases by month and in total, for the third quarter.

6. Calculate the expected cash disbursements for raw material (Gilden) purchases, by month and in total, for the third quarter.