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): 32,000 22,000 22,000 42,000 October 82,000 62,000 December July August September November The selling price of the beach umbrellas is $12 per unit. Sales in June were 37,000 units. b. All sales are on account. On the basis of past experience, sales are collected in the following pattern: 30% in the month of sale 65% 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 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 month's production needs. The inventory of Gilden on hand at the beginning and end of the quarter will be as follows: June 30 September 30 96,000 metres ? 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 $88,000.

Answer 1

Solution : Milo Company Monufac tores beach Umbrellas, Company ness for the third quarter. is now preparing detailed budgets for Prepare a sales budget, by month & in total, for the third quartey, expected Collections by month & in total, for the third ovuarter Milo Company : Sales budget . Joly 1 Aug . Particulars Sep Quartey budgeted unit Saves 42,000 Selling price pey Onit $12.00 82,000 $12.00 62.000 $12.00 188,000 $12.00 Budgeted sales 50,000 9844,000 704000 2,232,000 The Selling price of the beach Umbrellas is $ 12 per Unit..

Quorten : Budgeted Unit Saies: -.2.000 + 82,000 +62,000 186,000 Selling price per unit is $12.00 Budgeled Sales :- In July - 42.000 x $12.00 >) 504.000 In Aug AUG => 82,000x $12.00 = 984,000 In Sep -) 62,000.x $12.00 = 7441.000. In Quarter =) 186.000 $112.00 = 2,232,000. .. Selling price of the beach Ombrellas is $ 12 pey unit. Sales in June were 39,000

Milo Company Schedule of expected Cash Collection for 3rd Quark . Particulars | July | Aug . Sep Quarter $ 304,200 Accounts receivables, June 30 Joly Sares . $304,200 $158, 400 $501,600 August Sales $ 343,200 $ 302,400 $ 655,200 $ 230, 400 $ 957,600 $ 230,400 September Sores Total Cash Collection $462,600 $645,600. $885,600 $1,993,800 Quarler:- : Jone 30 -> $ 304,200 $ 304,200 July Saies 158.400+ 343,200 = $501,600 Aug Sales $ 302,400+ $ 655,200 - $957,600 Sep Sale $230,000 $230,000 Total Cash Collection in 3019 = 301,200 + 158,400 = $462,600 in Aug : $343,200+ $ 302400 V = 645,600

Correction In Quontey n er =304,200 + 501,600 +957.600 + 230,000 1,993, 800 Particulars Milo Company. Production budget July Aug Sep Budget conit Sales 42.000 82.000 62.000 Required ending inventory [15% of following monthsaid 10.600 17,600 3,100 Total needs 52,600 89,600 65,100 Less: opening inventory 6600 12600 9600 oct. 39.000 1600 33,600 5100 Required productionin Unins 216000 77,000 55,502 28.500 Company maintains finished goods 154. Total needs = 42,000 +10,600 = 52.600 (July] 57.600 + 82000 = 89,600 [ Aug $ 62,000 + 3,100 · 65,100 Ese pj = 32,000 + 1,600 - 33,600 Coct]

Required production in Unis =) Total needs - Opening inventory =) 52, 600 - 6,600 - 116000 (July] 3 89,600 - 12600 = 77.000 ( 109] => 65,100 - 96.00 = 55, 502 [ sep] => 33,600 - 51,00 = 28,500 [oct] Milo Company Direct materials budget Jory Aug 1. sep Particulars Quarter 77,000 $5,502 178,502 Required production Onits of Raw materials 21,6000 u Raw material needed to meet production (4,600X4]- 77,000x4 55502X4 184,000 - 308,000 = 822.008 178,502X4 7th,008 63,000 777,008 Add: Required ending 160000417000 63,000 inventory [50% of following month podaction] Total Onits of raw suu, 000 125,000 285,008 Materials needed opening inventory of Coilden 100000 162000 162000 119000 Unit of raw materials H4,000 587,000 LO008 to be porchased 100000 871,008

units cost of raw materials $0.8 Cost of Raw material to be purchased s helele, 000 x 0.80 => 355,200 [ in Joly] >> 587,000 x $0.80 = $469,600 [ Aug] -> 404,008 * $0.8 - 323,206. [ sep] >) 877,008 * $0.8 : 701,606 [auarter] Milo Company Schedule of expected cash dis borsements Particulars / Joy 7 Aug 1 sep 1 Quorter Accounts Payable, Jun 30 $ 88,000 $ 88,000 $ 204,600 Jury purchases Stom,800 $ 10141800 $112,400 $112,600 $ 224,800 Aug purchases 373.600 $ 73,600 Sep purchases Total Cash disburse- ments $ 192,800 $217, 200 $186,000 596,000