Question

Problem 8-30 Integration of the Sales, Production, and Direct Materials Budgets [LO8-2, LO8-3, LO8-4] 16.7 points 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): eBook July August September 31,000 72,000 41,000 October November December 21,000 7,500 8,000 Print References 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 $231,000. 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 September 30 74,300 feet ? feet

Answer 1

Solution 1:

Milo Company - Computation of Estimated Sales for 3rd Quarter
Particulars	July	August	September	Total
Sales in Units	31000	72000	41000	144000
Selling Price per unit	$11.00	$11.00	$11.00	$11.00
Estimated Sales	$341,000.00	$792,000.00	$451,000.00	$1,584,000.00

Solution 2:

Milo Company - Computation of Estimated Cash Collection for 3rd Quarter
Particulars	July	August	September	Total
Accounts receivables, June 30	$150,150.00			$150,150.00
July Sales	$102,300.00	$221,650.00		$323,950.00
August Sales		$237,600.00	$514,800.00	$752,400.00
September sales			$135,300.00	$135,300.00
Total Cash collection	$252,450.00	$459,250.00	$650,100.00	$1,361,800.00

Solution 3:

Milo Company - Computation of Estimated Production of Beach Umbrellas
Particulars	July	August	September	October
Sales in Units	31000	72000	41000	21000
Required ending Inventory (15% of Following month Sale)	10800	6150	3150	1125
Total Needs	41800	78150	44150	22125
Opening Inventory	4650	10800	6150	3150
Estimated Production (Sales + Ending Inventory - Opening Inventory)	37150	67350	38000	18975

Solution 4:

Milo Company - Computation of quantity of Gilden to be purchased in 3rd quarter
Particulars	July	August	September	Total
Estimated Production	37150	67350	38000	142500
Required qty of Gilder per unit (In feet)	4	4	4	4
Total requirement of Gilden	148600	269400	152000	570000
Required ending Inventory (50% of Following month Production Needs)	134700	76000	37950	37950
Total units of raw materials needed	283300	345400	189950	607950
Opening Inventory of Gilden	74300	134700	76000	74300
Quantity of Gilden to be Purchased	209000	210700	113950	533650

Solution 5:

Milo Company - Computation of cost of Gilden to be purchased in 3rd quarter
Particulars	July	August	September	Total
Quantity of Gilden to be Purchased	209000	210700	113950	533650
Cost per unit	$0.60	$0.60	$0.60	$0.60
Cost of Raw Material Purchase	$125,400.00	$126,420.00	$68,370.00	$320,190.00

Solution 6:

Milo Company - Computation of expected cash disbursement
Particulars	July	August	September	Total
Accounts Payable, June 30	$35,790.00			$35,790.00
July Purchases	$62,700.00	$62,700.00		$125,400.00
August Purchases		$63,210.00	$63,210.00	$126,420.00
September Purchases			$34,185.00	$34,185.00
Total Cash disbursements	$98,490.00	$125,910.00	$97,395.00	$321,795.00