Problem 9-19 Integration of Sales, Production, and Direct Materials Purchases Budgets (LO2] Water Sport Inc. manufactures a small personal water tube used for children learning to swim. Management is now preparing detailed budgets for the third quarter, July through September, and has assembled the following information to assist: 10 a. The Marketing Department has estimated sales as follows for the remainder of the year (number of water tubes): points Skipped July August September 7,400 October 5,900 November 4,900 December 3,800 3,400 2,900 eBook The selling price of the water tubes is $60. b. All sales are on account. Based on past experience, sales are expected to be collected in the following pattern: References 50% in the month of sale 45% in the month following sale 5% uncollectible 5% uncollectible The beginning accounts receivable balance (excluding uncollectible amounts) on July 1 will be $164,500. 10 points C. The company maintains finished goods inventories equal to 20% of the following month's sales. The inventory of finished goods on July 1 will be 1,480 units. d. Each water tube requires 3 kilograms of synthetic polyisoprene rubber compound. To prevent shortages, the company would like the inventory of synthetic rubber compound on hand at the end of each month to be equal to 20% of the following month's production needs. The inventory of synthetic rubber compound on hand on July 1 will be 4,260 kilograms. e. The synthetic rubber compound costs $2.50 per kilogram. Water Sport pays for 70% of its purchases in the month of purchase; the remainder is paid for in the following month. The accounts payable balance for synthetic rubber compound purchases will be $14,100 on July 1. Skipped Required: 1. Prepare a sales budget, by month and in total, for the third quarter. (Show your budget in both units of water tubes and dollars.) Also prepare a schedule of expected cash collections, by month and in total, for the third quarter. pints Skipped Sales budget August July September Quarter Budgeted sales (units) Selling price per unit Total budgeted sales eBook 10 September Quarter points Skipped Schedule of expected cash collections July August Accounts receivable, beginning balance July sales: August sales: September sales: Total cash collections 0 0 0 eBook 2. Prepare a production budget for each of the months July through October. 10 points Production budget July August Skipped September October Budgeted sales (units) Total needs 0 0 0 eBook Required production (units) References 3. Prepare a direct materials purchases budget for synthetic rubber compound, by month and in total, for the third quarter. Also prepare a schedule of expected cash disbursements for synthetic rubber compound, by month and in total, for the third quarter. Direct materials purchases budget July August 10 September Quarter points Skipped Required production (units) Material D236 needed per unit (kgs.) Production needs (kgs.) Total Material D236 needs L 0 0 0 eBook Raw materials to be purchased Cost of raw materials to be purchased at $2.50 per kg References Quarter Schedule of expected cash disbursement July August September Accounts payable, beginning balance July purchases: August purchases: September purchases: Total cash disbursements 0 $ 0 $ 0 $
