Reference no: EM132540506
Konka 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:
a. The Marketing Department has estimated sales as follows for the remainder of the year (in units):
July . . . . . . . . . . . . . . . . . . . 30,000 October . . . . . . . . . . . . . . . . 20,000
August . . . . . . . . . . . . . . . . . 70,000 November . . . . . . . . . . . . . . 10,000
September . . . . . . . . . . . . . . 50,000 December . . . . . . . . . . . . . . 10,000
The selling price of the beach umbrellas is $12 per unit.
b. 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
Sales for June totaled $300,000.
c. The company maintains finished goods inventories equal to 15% of the following month's sales. This requirement will be met at the end of June.
d. 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 month's production needs. The inventory of Gilden on hand at the beginning and end of the quarter will be:
June 30 . . . . . . . . . . . . . . 72,000 feet
September 30 . . . . . . . . . ? feet
e. Gilden costs $0.80 per foot. One-half of a month's 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 $76,000.
Required:
Question 1. Make a sales budget, by month and in total, for the third quarter. (Show your budget in both units and dollars.) Also make a schedule of expected cash collections, by month and in total, for the third quarter.
Question 2. Make a production budget for each of the months July-October.
Question 3. Make a direct materials budget for Gilden, by month and in total, for the third quarter. Also make a schedule of expected cash disbursements for Gilden, by month and in total, for the third quarter.
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