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 35,000 October 25,000 August 80,000 November 11,500 September 49,000 December 12,000     The selling price of the beach umbrellas is $13 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 $377,000. 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 83,500 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 $42,990.   1. Calculate the quantity of Gilden (in feet) that needs to be purchased by month and in total, for the third quarter. 2. Calculate the cost of the raw material (Gilden) purchases by month and in total, for the third quarter. 3. Calculate the expected cash disbursements for raw material (Gilden) purchases, by month and in total, for the third quarter.

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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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:

 

  1. The Marketing Department has estimated sales as follows for the remainder of the year (in units):

 

       
July 35,000 October 25,000
August 80,000 November 11,500
September 49,000 December 12,000
 

 

The selling price of the beach umbrellas is $13 per unit.

  1. 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 $377,000.

  1. 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.

  2. 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 83,500 feet
September 30 ? feet
 

 

  1. 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 $42,990.

 

1. Calculate the quantity of Gilden (in feet) that needs to be purchased by month and in total, for the third quarter.

2. Calculate the cost of the raw material (Gilden) purchases by month and in total, for the third quarter.

3. Calculate the expected cash disbursements for raw material (Gilden) purchases, by month and in total, for the third quarter.

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