Reference no: EM131772447

Milo 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

5% uncollectible

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:

1. Prepare a sales budget, by month and in total, for the third quarter. (Show your budget in both units and dollars.) 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-October.

3. Prepare a direct materials budget for Gilden, by month and in total, for the third quarter. Also prepare a schedule of expected cash disbursements for Gilden, by month and in total, for the third quarter.