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:

a.
The Marketing Department has estimated sales as follows for the remainder of the year (in units):
 	The selling price of the beach umbrellas is $12 per unit.


  July	30,000  	  October	20,000
  August	70,000  	  November	10,000
  September	50,000  	  December	10,000

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 $300,000.

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 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	72,000	 feet
  September 30	?	 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 $76,000.

Required:
1-a.
Prepare a sales budget, by month and in total, for the third quarter.


1-b.
Prepare a schedule of expected cash collections, by month and in total, for the third quarter.


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


3-a.
Prepare a direct materials budget for Gilden,, by month and in total, for the third quarter. (Round your Unit cost of raw materials to 2 decimal places.)


3-b.
Prepare a schedule of expected cash disbursements for Gilden,, by month and in total, for the third quarter.


Garrison 15e Recheck 2015-01-16


Explanation:
1-b.
The schedule of expected cash collections from sales:
July:
$300,000 × 65% = $195,000
$360,000 × 30% = $108,000

August:
$360,000 × 65% = $234,000
$840,000 × 30% = $252,000

September:
$840,000 × 65% = $546,000
$600,000 × 30% = $180,000

3-a.
The direct materials budget for the third quarter:
Desired units of ending raw materials inventory for september:
18,500 units (October) × 4 feet per unit = 74,000 feet
74,000 feet × ½ = 37,000 feet

3-b.
The schedule of expected cash disbursements:
July:
$164,800 × 50% = $82,400

August:
$164,800 × 50% = $82,400
$180,000 × 50% = $90,000

September:
$180,000 × 50% = $90,000
$102,400 × 50% = $51,200