Management Accounting Assignment Question:
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
|
30,000
|
October
|
20,000
|
|
August
|
70,000
|
November
|
10,000
|
|
September
|
50,000
|
December
|
10,000
|
The selling price of the beach umbrellas is $12 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 $300,000.
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 meters 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:
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June 30
|
72,000 meters
|
|
September 30
|
? meters
|
Gilden costs $0.80 per meter. 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 $76,000.
Required: Prepare a sales budget, by month and in total, for the third quarter. (Show your budget in both units and dollars.) Also prepare a schedule of expected cash collections, by month and in total, for the third quarter.