Problem 8-30 Integration of the Sales, Production, and DirectMaterials Budgets [LO8-2, LO8-3, LO8-4]Milo Company...Problem...

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Accounting

Problem 8-30 Integration of the Sales, Production, and DirectMaterials Budgets [LO8-2, LO8-3, LO8-4]
Milo Company manufactures beach umbrellas. The company ispreparing detailed budgets for the third quarter and has assembledthe following information to assist in the budget preparation:
The Marketing Department has estimated sales as follows for theremainder of the year (in units):
July 38,500 October 28,500
August 87,000 November 15,000
September 56,000 December 15,500
The selling price of the beach umbrellas is $14 per unit.
All sales are on account. Based on past experience, sales arecollected in the following pattern:
30% in the month of sale
65% in the month following sale
5% uncollectible
Sales for June totaled $504,000.
The company maintains finished goods inventories equal to 15% ofthe following month’s sales. This requirement will be met at theend of June.
Each beach umbrella requires 4 feet of Gilden, a material thatis sometimes hard to acquire. Therefore, the company requires thatthe ending inventory of Gilden be equal to 50% of the followingmonth’s production needs. The inventory of Gilden on hand at thebeginning and end of the quarter will be:
June 30 91,550 feet
September 30 ? feet
Gilden costs $0.60 per foot. One-half of a month’s purchases ofGilden is paid for in the month of purchase; the remainder is paidfor in the following month. The accounts payable on July 1 forpurchases of Gilden during June will be $49,290.
Required:
1. Calculate the estimated sales, by month and in total, for thethird quarter.
2. Calculate the expected cash collections, by month and intotal, for the third quarter.
3. Calculate the estimated quantity of beach umbrellas that needto be produced in July, August, September, and October.
4. Calculate the quantity of Gilden (in feet) that needs to bepurchased by month and in total, for the third quarter.
5. Calculate the cost of the raw material (Gilden) purchases bymonth and in total, for the third quarter.
6. Calculate the expected cash disbursements for raw material(Gilden) purchases, by month and in total, for the thirdquarter.

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Solutions Milo Company Sales Budget Particulars July August September Quarter Budgeted Unit sales 38500 87000 56000 181500 Selling Price per unit 1400 1400 1400 1400 Budgeted Sales 539000 1218000 784000 2541000 Milo Company Schedule of Expected Cash Collection for 3rd Quarter Particulars July August September Quarter Accounts receivables June 30 327600 327600 July Sales 161700 350350 See Answer

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In: AccountingProblem 8-30 Integration of the Sales, Production, and DirectMaterials Budgets [LO8-2, LO8-3, LO8-4]Milo Company...Problem 8-30 Integration of the Sales, Production, and DirectMaterials Budgets [LO8-2, LO8-3, LO8-4]Milo Company manufactures beach umbrellas. The company ispreparing detailed budgets for the third quarter and has assembledthe following information to assist in the budget preparation:The Marketing Department has estimated sales as follows for theremainder of the year (in units):July38,500October28,500August87,000November15,000September56,000December15,500The selling price of the beach umbrellas is $14 per unit.All sales are on account. Based on past experience, sales arecollected in the following pattern:30%in the month of sale65%in the month following sale5%uncollectibleSales for June totaled $504,000.The company maintains finished goods inventories equal to 15% ofthe following month’s sales. This requirement will be met at theend of June.Each beach umbrella requires 4 feet of Gilden, a material thatis sometimes hard to acquire. Therefore, the company requires thatthe ending inventory of Gilden be equal to 50% of the followingmonth’s production needs. The inventory of Gilden on hand at thebeginning and end of the quarter will be:June 3091,550feetSeptember 30?feetGilden costs $0.60 per foot. One-half of a month’s purchases ofGilden is paid for in the month of purchase; the remainder is paidfor in the following month. The accounts payable on July 1 forpurchases of Gilden during June will be $49,290.Required:1. Calculate the estimated sales, by month and in total, for thethird quarter.2. Calculate the expected cash collections, by month and intotal, for the third quarter.3. Calculate the estimated quantity of beach umbrellas that needto be produced in July, August, September, and October.4. Calculate the quantity of Gilden (in feet) that needs to bepurchased by month and in total, for the third quarter.5. Calculate the cost of the raw material (Gilden) purchases bymonth and in total, for the third quarter.6. Calculate the expected cash disbursements for raw material(Gilden) purchases, by month and in total, for the thirdquarter.


July	38,500	October	28,500
August	87,000	November	15,000
September	56,000	December	15,500


30%	in the month of sale
65%	in the month following sale
5%	uncollectible