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): July August September 31,000 October 71,000 November 51,000 December 21,000 11,000 11,000 The selling price of the beach umbrellas is $10 per unit. Sales in June were 26,000 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: June 30 September 30 74.000 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 $77,000.

Answer 1

Solutions:

Milo Company
Sales Budget
Particulars	July	August	September	Quarter
Budgeted Unit sales	31000	71000	51000	153000
Selling Price per unit	$10.00	$10.00	$10.00	$10.00
Budgeted Sales	$3,10,000	$7,10,000	$5,10,000	$15,30,000
Milo Company
Schedule of Expected Cash Collection for 3rd Quarter
Particulars	July	August	September	Quarter
Accounts receivables, June 30	$1,43,000			$1,43,000
July Sales	$1,24,000	$1,70,500		$2,94,500
August Sales		$2,84,000	$3,90,500	$6,74,500
September sales			$2,04,000	$2,04,000
Total Cash collection	$2,67,000	$4,54,500	$5,94,500	$13,16,000
Milo Company
Production Budget
Particulars	July	August	September	October
Budgeted unit sales	31000	71000	51000	21000
Add: Required ending Inventory (15% of Following month Sale)	10650	7650	3150	1650
Total Needs	41650	78650	54150	22650
Less: Opening Inventory	4650	10650	7650	3150
Required Production in units	37000	68000	46500	19500
Milo Company
Direct Materials Budget
Particulars	July	August	September	Quarter
Required Production in Units	37000	68000	46500	151500
Units of Raw materials needed per unit	4	4	4	4
Units of Raw materials needed to Meet production	148000	272000	186000	606000
Add: Required ending Inventory (50% of Following month Production Needs)	136000	93000	39000	39000
Total units of raw materials needed	284000	365000	225000	645000
Less: Opening Inventory of Gilden	74000	136000	93000	74000
Units of raw Materials to be Purchased	210000	229000	132000	571000
Milo Company
Cost of Direct Materials purchases Budget
Particulars	July	August	September	Quarter
Units of raw Materials to be Purchased	210000	229000	132000	571000
Unit cost of raw materials	$0.80	$0.80	$0.80	$0.80
Cost of Raw Material to be purchased	$1,68,000	$1,83,200	$1,05,600	$4,56,800
Milo Company
Schedule of expected cash disbursements
Particulars	July	August	September	Quarter
Accounts Payable, June 30	$77,000			$77,000
July Purchases	$84,000	$84,000		$1,68,000
August Purchases		$91,600	$91,600	$1,83,200
September Purchases			$52,800	$52,800
Total Cash disbursements	$1,61,000	$1,75,600	$1,44,400	$4,81,000