Swanson, Inc., manufactures an advanced swim fin for scubadivers. Management is now preparing detailed budgets for the thirdquarter, July through September, and has assembled the followinginformation to assist in preparing the budget:

a. The Marketing Department has estimated sales as follows forthe remainder of the year (in pairs of swim fins). The sellingprice of the swim fins is $21 per pair.

July 6,400 October 4,400  

August 7,400 November 3,400  

September 5,400 December 3,400  

b. All sales are on account. Based on past experience, sales areexpected to be collected in the following pattern:

43% in the month of sale

48% in the month following sale

9% uncollectible

The beginning accounts receivable balance (excludinguncollectible amounts) on July 1 will be $154,000.

c.

The company maintains finished goods inventories equal to 9% ofthe following month’s sales. The inventory of finished goods onJuly 1 will be 576 pairs.

d.

Each pair of swim fins requires 4 pounds of geico compound. Toprevent shortages, the company would like the inventory of geicocompound on hand at the end of each month to be equal to 20% of thefollowing month’s production needs. The inventory of geico compoundon hand on July 1 will be 5,192 pounds.

e.

Geico compound costs $2.50 per pound. Crydon pays for 60% of itspurchases in the month of purchase; the remainder is paid for inthe following month. The accounts payable balance for geicocompound purchases will be $13,400 on July 1.

Required:

1a.

Prepare a sales budget, by month and in total, for the thirdquarter.

1b.

Prepare a schedule of expected cash collections, by month and intotal, for the third quarter. (Do not round intermediatecalculations.)

  

2. Prepare a production budget for each of the months Julythrough October.

3a.

Prepare a direct materials budget for geico compound, by monthand in total, for the third quarter. (Do not round intermediatecalculations.)

3b.

Prepare a schedule of expected cash disbursements for geicocompound, by month and in total, for the third quarter. (Do notround intermediate calculations.)