Question

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 34,000 August 78,000 September 47,000 October 24,000 November 10,500 December 11,000 The selling price of the beach umbrellas is $11 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 $297,000. 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:

Answer 1

1.

particulars	july	august	september	total
estimated sales in units	34000	78000	47000
selling price perunit	$11	$11	$11
estimated sales in $(sales units*$11)	$374,000	$858,000	$517,000	$1,749,000

2.

particulars	june	july	august	september	total
sales	297000	374000	858000	517000	1749000
collection:-
30% in the month of sale	89100	112200	257400	155100	524700
65% in following month		193050	243100	557700	993850

3.

particulars	july	august	september	october
stock of finished goods to be maintained(15% of next month sale)	11700	7050	3600	1575
	(78000*15%)	(47000*15%)	(24000*15%)	(10500*15%)
85% of current month sale	28900	66300	39950	20400
total production(units)	(34000*85%)	(78000*85%)	(47000*85%)	(24000*85%)

4.

particulars	july	august	september	october	total
requirement of gilden(production units*4 feet of gilden)	162400	293400	174200	87900
	(40600*4)	(73350*4)	(43550*4)	(21975*4)
purchase of gilden:-					592750
50% of current month requirement	81200	146700	87100
50% stock for following month's production	146700	87100	43950

5.

particulars	july	august	september	total
total purchase cost(units purchase*$0.8)	182320	187040	104840	474200
	(227900*0.8)	(233800*0.8)	(131050*0.8)

6.

particulars	july	august	september	total
cash payments:-
one half for previous month's purchase	54920	91160	93520
one half of current month's purchase	91160	93520	52420
total	146080	184680	145940	476700