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) 33,000 23,000 23,000 43,000 October 83,000 November 63,000 December July August September The selling price of the beach umbrellas is $10 per unit. Sales in June were 38,000 units b. All sales are on account. On the basis of past experience, sales are collected in the following pattern: 40% in the month of sale 55% 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: 98,000 metres ? metres June 30 September 30 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 $89,000

Answer 1

Solutions:

E F G H I Particulars Budgeted Unit sales Selling Price per unit Budgeted Sales Milo Company Sales Budget July | 43000 $10.00 $430,000 August 83000 $10.00 $830,000 September 63000 $10.00 $630,000 Quarter 189000 $10.00 $1,890,000 Milo Company Schedule of Expected Cash Collection for 3rd Quarter Particulars July August September Accounts receivables, June 30 $209,000 July Sales $172,000 $236,500 August Sales $332,000 $456,500 September sales $252,000 Total Cash collection $381,000 $568,500 $708,500 Quarter $209,000 $408,500 $788,500 $252,000 $1,658,000 Milo Company Production Budget July 43000 August 83000 September 63000 October 33000 Particulars Budgeted unit sales Add: Required ending Inventory (15% of Following month Sale) Total Needs Less: Opening Inventory Required Production in units 29 12450 55450 6450 49000 9450 92450 12450 80000 4950 67950 9450 58500 3450 36450 4950 31500 31 32 August 80000 September 58500 Quarter 187500 36 37 320000 234000 750000 Milo Company Direct Materials Budget Particulars July Required Production in Units 49000 Units of Raw materials needed per unit Units of Raw materials needed to Meet production 196000 Add: Required ending Inventory (50% of Following month Production Needs) 160000 Total units of raw materials needed 356000 Less: Opening Inventory of Gilden 98000 Units of raw Materials to be purchased 258000 Unit cost of raw materials $0.80 Cost of Raw Material to be purchased $206,400 39 40 117000 437000 160000 277000 $0.80 $221,600 63000 297000 117000 180000 $0.80 $144,000 63000 813000 98000 715000 $0.80 $572,000 September Particulars Accounts Payable, June 30 July Purchases August Purchases September Purchases Total Cash disbursements Milo Company Schedule of expected cash disbursements July August $89,000 $103,200 $103,200 $110,800 Quarter $89,000 $206,400 $221,600 $72,000 $589,000 $110,800 $72,000 $182,800 $192,200 $214,000 Sheet152 (11) Sheet598 Sheet615 Sheet471 (2) Sheet III 0 <