Question

Milo Company manufactures beach umbrelas. 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) The selling price of the beach umbrellas is $13 per unit uly 35,000 October 25,000 11.500 12.000 August September 80.000 49,000 November December b. All sales are on account. Based on past experience, sales are collected in the following paterm 30% in the month of sale 65% in the month following sale 5 % uncollectible Sales for June totaled $377,000 c. The company maintains finished goods inventories equal to 15 % of the followin 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 month's sales. This requirement will be met at the end of June. June 30 September 30 83,500 feet feet e. Glden costs S0.60 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 $42,990.

Answer 1

Solution 1a:

Milo Company - Computation of Estimated Sales for 3rd Quarter
Particulars	July	August	September	Total
Sales in Units	35000	80000	49000	164000
Selling Price per unit	$13.00	$13.00	$13.00	$13.00
Estimated Sales	$455,000.00	$1,040,000.00	$637,000.00	$2,132,000.00

Solution 1b:

Milo Company - Computation of Estimated Cash Collection for 3rd Quarter
Particulars	July	August	September	Total
Accounts receivables, June 30	$245,050.00			$245,050.00
July Sales	$136,500.00	$295,750.00		$432,250.00
August Sales		$312,000.00	$676,000.00	$988,000.00
September sales			$191,100.00	$191,100.00
Total Cash collection	$381,550.00	$607,750.00	$867,100.00	$1,856,400.00

Solution 2:

Milo Company - Computation of Estimated Production of Beach Umbrellas
Particulars	July	August	September	October
Sales in Units	35000	80000	49000	25000
Required ending Inventory (15% of Following month Sale)	12000	7350	3750	1725
Total Needs	47000	87350	52750	26725
Opening Inventory	5250	12000	7350	3750
Estimated Production (Sales + Ending Inventory - Opening Inventory)	41750	75350	45400	22975

Solution 3a:

Milo Company - Computation of quantity of Gilden to be purchased in 3rd quarter
Particulars	July	August	September	Total
Estimated Production	41750	75350	45400	162500
Required qty of Gilder per unit (In feet)	4	4	4	4
Total requirement of Gilden	167000	301400	181600	650000
Required ending Inventory (50% of Following month Production Needs)	150700	90800	45950	45950
Total units of raw materials needed	317700	392200	227550	695950
Opening Inventory of Gilden	83500	150700	90800	83500
Quantity of Gilden to be Purchased	234200	241500	136750	612450
Milo Company - Computation of cost of Gilden to be purchased in 3rd quarter
Particulars	July	August	September	Total
Quantity of Gilden to be Purchased	234200	241500	136750	612450
Cost per unit	$0.60	$0.60	$0.60	$0.60
Cost of Raw Material Purchase	$140,520.00	$144,900.00	$82,050.00	$367,470.00

Solution 3b:

Milo Company - Computation of expected cash disbursement
Particulars	July	August	September	Total
Accounts Payable, June 30	$42,990.00			$42,990.00
July Purchases	$70,260.00	$70,260.00		$140,520.00
August Purchases		$72,450.00	$72,450.00	$144,900.00
September Purchases			$41,025.00	$41,025.00
Total Cash disbursements	$113,250.00	$142,710.00	$113,475.00	$369,435.00