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:

a. The Marketing Department has estimated sales as follows for the remainder of the year (number of water tubes):

July	7,000	October	3,400
August	5,500	November	3,000
September	4,500	December	2,500

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:

50	%	in the month of sale
45	%	in the month following sale
5	%	uncollectible

The beginning accounts receivable balance (excluding uncollectible amounts) on July 1 will be $162,500.

The company maintains finished goods inventories equal to 20% of the following months sales. The inventory of finished goods on July 1 will be 1,400 units.

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 months production needs. The inventory of synthetic rubber compound on hand on July 1 will be 4,020 kilograms.

The synthetic rubber compound costs $3.50 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 $12,900 on July 1.

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.

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:

a. The Marketing Department has estimated sales as follows for the remainder of the year (number of water tubes):

July	7,000	October	3,400
August	5,500	November	3,000
September	4,500	December	2,500

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:

50	%	in the month of sale
45	%	in the month following sale
5	%	uncollectible

The beginning accounts receivable balance (excluding uncollectible amounts) on July 1 will be $162,500.

The company maintains finished goods inventories equal to 20% of the following months sales. The inventory of finished goods on July 1 will be 1,400 units.

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 months production needs. The inventory of synthetic rubber compound on hand on July 1 will be 4,020 kilograms.

The synthetic rubber compound costs $3.50 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 $12,900 on July 1.

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.

Sales Budget

	july	august	september	quater
Budget sales (unit)
Selling price
Total budgeted Sales

Schedule of expected cash collection

	July	August	September	Quarter
Account receivable, beggining balance
July sales
August Sales
September sales
Total cash collection

2. Prepare a production budget for each of the months July through October.

Production Budget

	July	August	September	Quarter
Budgeted sales(units)
Add :desired ending inventory
Total needs
Less: Beginning inventory
Required production (units)

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 material purchase budget

	July	August	September	Quarter
Required production(units)
Material D236 need per unit(kg)
Production needs(kg)
Add: desired ending inventory(kg)
Total material D236 needs
Less:beginning inventory(kg)
Raw materials to be purchased
Cost of raw materials to be purchased at $3.50 per kg

Schedule of expected cash disbursements

	July	August	September	Quarter
Account payable, beginning balance
July purchases:
August purchases
September purchases:
Total Cash disbursement