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 35,500 October 25,500 August 81,000 November 12,000 September 50,000 December 12,500 The selling price of the beach umbrellas is $14 per unit. 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 $420,000. 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. 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 84,650 feet September 30 ? feet Gilden costs $0.60 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 $43,890. Calculate the estimated quantity of beach umbrellas that need to be produced in July, August, September, and October. July August September October Required production in units 52,975 76,350 46,350 23,475 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. (Round your Unit cost of raw materials to 2 decimal places.) July August September Quarter Total units of raw materials to be purchased Cost of raw materials to be purchased
Master Budget
A master budget can be defined as an estimation of the revenue earned or expenses incurred over a specified period of time in the future and it is generally prepared on a periodic basis which can be either monthly, quarterly, half-yearly, or annually. It helps a business, an organization, or even an individual to manage the money effectively. A budget also helps in monitoring the performance of the people in the organization and helps in better decision-making.
Sales Budget and Selling
A budget is a financial plan designed by an undertaking for a definite period in future which acts as a major contributor towards enhancing the financial success of the business undertaking. The budget generally takes into account both current and future income and expenses.
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:
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The Marketing Department has estimated sales as follows for the remainder of the year (in units):
| July | 35,500 | October | 25,500 |
| August | 81,000 | November | 12,000 |
| September | 50,000 | December | 12,500 |
The selling price of the beach umbrellas is $14 per unit.
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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 $420,000.
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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.
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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 | 84,650 | feet |
| September 30 | ? | feet |
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Gilden costs $0.60 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 $43,890.
Calculate the estimated quantity of beach umbrellas that need to be produced in July, August, September, and October.
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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. (Round your Unit cost of raw materials to 2 decimal places.)
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Calculate the expected cash disbursements for raw material (Gilden) purchases, by month and in total, for the third quarter.
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