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: The Marketing Department has estimated sales as follows for the remainder of the year (in units): July 33,000 October 23,000 August 76,000 November 9,500 September45,000 December 10,000 The selling price of the beach umbrellas is $15 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 $375,000. 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 78,900 feet September 30 ? feet

Answer 1

Solution 1:

Milo Company - Computation of Estimated Sales for 3rd Quarter
Particulars	July	August	September	Total
Sales in Units	33000	76000	45000	154000
Selling Price per unit	$15.00	$15.00	$15.00	$15.00
Estimated Sales	$495,000.00	$1,140,000.00	$675,000.00	$2,310,000.00

Solution 2:

Milo Company - Computation of Estimated Cash Collection for 3rd Quarter
Particulars	July	August	September	Total
Accounts receivables, June 30	$243,750.00			$243,750.00
July Sales	$148,500.00	$321,750.00		$470,250.00
August Sales		$342,000.00	$741,000.00	$1,083,000.00
September sales			$202,500.00	$202,500.00
Total Cash collection	$392,250.00	$663,750.00	$943,500.00	$1,999,500.00

Solution 3:

Milo Company - Computation of Estimated Production of Beach Umbrellas
Particulars	July	August	September	October
Sales in Units	33000	76000	45000	23000
Required ending Inventory (15% of Following month Sale)	11400	6750	3450	1425
Total Needs	44400	82750	48450	24425
Opening Inventory	4950	11400	6750	3450
Estimated Production (Sales + Ending Inventory - Opening Inventory)	39450	71350	41700	20975

Solution 4:

Milo Company - Computation of quantity of Gilden to be purchased in 3rd quarter
Particulars	July	August	September	Total
Estimated Production	39450	71350	41700	152500
Required qty of Gilder per unit (In feet)	4	4	4	4
Total requirement of Gilden	157800	285400	166800	610000
Required ending Inventory (50% of Following month Production Needs)	142700	83400	41950	41950
Total units of raw materials needed	300500	368800	208750	651950
Opening Inventory of Gilden	78900	142700	83400	78900
Quantity of Gilden to be Purchased	221600	226100	125350	573050

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	221600	226100	125350	573050
Cost per unit	$0.60	$0.60	$0.60	$0.60
Cost of Raw Material Purchase	$132,960.00	$135,660.00	$75,210.00	$343,830.00

solution 6:

Milo Company - Computation of expected cash disbursement
Particulars	July	August	September	Total
Accounts Payable, June 30	$39,390.00			$39,390.00
July Purchases	$66,480.00	$66,480.00		$132,960.00
August Purchases		$67,830.00	$67,830.00	$135,660.00
September Purchases			$37,605.00	$37,605.00
Total Cash disbursements	$105,870.00	$134,310.00	$105,435.00	$345,615.00