QUESTION 3B

Milo Company manufactures beach umbrellas. The company is now preparing detailed budgets for the third quarter and has assembled the following information to assist in the budget preparation: a. The Marketing Department has estimated sales as follows for the remainder ofthe year {in units}: July 35,668 October 25,866 August 75,069 November 15,666 September 55,068 December 15,@@@ The selling price ofthe beach umbrellas is $10 per unit. Sales in June were 30.000 units. b. All sales are on account. On the basis of past experience, sales are collected in the following pattern: 46% in the month of sale 55% in the month following sale 5% uncollectible r c. The company maintains finished goods inventories equal to 15% ofthe following month's sales. This requirement will be met atthe end of June. d. Each beach umbrella requires 4 metres of Gilden, a material that is sometimes hard to get. Therefore, the company requires that the inventory of Gilden on hand at the end of each month be equal to 50% ofthe following month's production needs. The inventory of Gilden on hand at the beginning and end ofthe quarter will be as follows: The selling price ofthe beach umbrellas is $10 per unit. Sales in June were 30.000 units. b. All sales are on account. On the basis of past experience, sales are collected in the following pattern: 46% in the month of sale 55% in the month following sale 5% uncollectible c. The company maintains finished goods inventories equal to 15% of the following month's sales. This requirement will be met atthe end ofJune. d. Each beach umbrella requires 4 metres of Gilden, a material that is sometimes hard to get. Therefore, the company requires that the inventory of Gilden on hand at the end of each month be equal to 50% ofthe following month's production needs. The inventory of Gilden on hand at the beginning and end ofthe quarter will be as follows: June 38 82,069 metres September 30 ? metres ' e. Gilden costs $0.80 per metre. One-half of a month's purchases of Gilden are paid for in the month of purchase; the remainder are paid for in the following month. The accounts payable on July 1 for purchases of Gilden during June will be $81,000. Required: 1. Prepare a sales budget, by month and in total, for the third quarter. Also, prepare a schedule of expected cash collections, by month and in total, for the third quarter. MILO COMPANY Sales Budget July August September Quarter Budgeted sales MILO COMPANY Schedule of Expected Cash Collections July August September Quarter Accounts receivable, June 30 July sales August sales September sales Total cash collections2. Prepare a production budget for each of the months July to October. MILO COMPANY Production Budget for July-October July August September October Total needs3. Prepare a materials purchases budget for Gllden, by month and in total, for the third quarter. Also, prepare a schedule of expected cash payments for Gilden, by month and in total, for the third quarter. Total needs (metres)