Reference no: EM133088170
Question - 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 of the year (in units):
July: 39,000
August: 79,000
September: 59,000
October: 29,000
November: 19,000
December: 19,000
The selling price of the beach umbrellas is $10 per unit. Sales in June were 34,000 units.
b. All sales are on account. On the basis of past experience, sales are collected in the following pattern: 40% 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 months sales. This requirement will be met at the 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% of the following months production needs. The inventory of Gilden on hand at the beginning and end of the quarter will be as follows:
June 30th: 90,000 metres
September 30th: ? metres
e. Gilden costs $0.80 per metre. One-half of a months 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 Golden during June will be $85,000.
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.
2. Prepare a production budget for each of the months July to October.
3. Prepare a materials purchases budget for Gilden, 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.
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