Milo Company manufactures beach umbrellas. The company is preparing budgets for the third quarter and assembled the following information: a. The Marketing Department estimated unit sales as follows for the remainder of the year: July August September 34,000 October 78,000 November 24,000 10,500 47,000 December 11,000 The selling price of the beach umbrellas is $11 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 $297,000. 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 ending inventory of Gilden 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 September 30 81,200 feet ? feet e. Gilden costs $0.80 per foot. One-half of a month's purchases of Gilden is paid for in the month of purchase; the remainder is paid for in the following month. The accounts payable on July 1 for purchases of Gilden during June will be $54,920. Required: 1. Calculate the estimated sales, by month and in total, for the third quarter. 2. Calculate the expected cash collections, by month and in total, for the third quarter. 3. Calculate the estimated quantity of beach umbrellas that need to be produced in July, August, September, and October. 4. Calculate the quantity of Gilden (in feet) that needs to be purchased by month and in total, for the third quarter. 5. Calculate the cost of the raw material (Gilden) purchases by month 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 third quarter.
Milo Company manufactures beach umbrellas. The company is preparing budgets for the third quarter and assembled the following information: a. The Marketing Department estimated unit sales as follows for the remainder of the year: July August September 34,000 October 78,000 November 24,000 10,500 47,000 December 11,000 The selling price of the beach umbrellas is $11 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 $297,000. 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 ending inventory of Gilden 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 September 30 81,200 feet ? feet e. Gilden costs $0.80 per foot. One-half of a month's purchases of Gilden is paid for in the month of purchase; the remainder is paid for in the following month. The accounts payable on July 1 for purchases of Gilden during June will be $54,920. Required: 1. Calculate the estimated sales, by month and in total, for the third quarter. 2. Calculate the expected cash collections, by month and in total, for the third quarter. 3. Calculate the estimated quantity of beach umbrellas that need to be produced in July, August, September, and October. 4. Calculate the quantity of Gilden (in feet) that needs to be purchased by month and in total, for the third quarter. 5. Calculate the cost of the raw material (Gilden) purchases by month 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 third quarter.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Milo Company manufactures beach umbrellas. The company is preparing budgets for the third quarter and assembled the following
information:
a. The Marketing Department estimated unit sales as follows for the remainder of the year:
July
August
September
34,000 October
78,000 November
24,000
10,500
47,000 December
11,000
The selling price of the beach umbrellas is $11 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 $297,000.
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
ending inventory of Gilden 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
September 30
81,200 feet
? feet
e. Gilden costs $0.80 per foot. One-half of a month's purchases of Gilden is paid for in the month of purchase; the remainder is paid
for in the following month. The accounts payable on July 1 for purchases of Gilden during June will be $54,920.
Required:
1. Calculate the estimated sales, by month and in total, for the third quarter.
2. Calculate the expected cash collections, by month and in total, for the third quarter.
3. Calculate the estimated quantity of beach umbrellas that need to be produced in July, August, September, and October.
4. Calculate the quantity of Gilden (in feet) that needs to be purchased by month and in total, for the third quarter.
5. Calculate the cost of the raw material (Gilden) purchases by month 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 third quarter.
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