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: 36,000 October 26,000 82,000 November 12,500 13,000 July August September 51,000 December The selling price of the beach umbrellas is $15 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 $465,000. 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 85,800 feet ? feet e. 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 $44,790. 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.

Budgeting is a method of estimating expected future outcomes based on past events. Budgeting schedules for sales, collections, purchases and payments are estimated based on past performance.This helps an organization to plan the cash budget and financials for later periods.Companies can put restrictions on certain expenses to avoid over-budgeting.Utilizing it companies can make borrowing decisions.Working Note June July August September October November December Sales (in Units) 36,000 82,000 51,000 26,000 12,500 13,000Selling Price per Unit $ 15.00 $ 15.00 $ 15.00 $ 15.00 $ 15.00 $ 15.00Total Sales $465,000 $ 540,000 $1,230,000 $ 765,000 $ 390,000 $ 187,500 $ 195,000Credit Collections:In the Month of Sale30% $ 162,000 $ 369,000 $ 229,500 $ 117,000 $ 56,250 $ 58,500In the Following Month65% $ 302,250 $ 351,000 $ 799,500 $ 497,250 $ 253,500 $ 121,875Uncollectible5% $ 27,000 $ 61,500 $ 38,250 $ 19,500 $ 9,375 $ 9,750Ending Finished Goods Inventory15% 12,300 7,650 3,900 1,875 1,950Beginning Finished Goods Inventory 5,400 12,300 7,650 3,900 1,875 1,950Production 42,900 77,350 47,250 23,975 12,575Each Umbrella Requires4 Feet 171,600 309,400 189,000 95,900 50,300Ending Raw Material Inventory50% 154,700 94,500 47,950 25,150 Beginning Raw Material Inventory 85,800 154,700 94,500 47,950 25,150 Purchases 240,500 249,200 142,450 73,100Gilden Cost $ 0.60 $ 144,300 $ 149,520 $ 85,470 $ 43,860Credit Payments:In the Month of Purchase50% $ 72,150 $ 74,760 $ 42,735 $ 21,930In the Following Month50% $ 44,790 $ 72,150 $ 74,760 $ 42,735 $ 21,9301a. Estimated Sales -Estimated Sales July August September Quarter Sales (in Units) 36,000 82,000 51,000 169,000Selling Price per Unit $ 15.00 $ 15.00 $ 15.00 $ 15.00Budgeted Sales $ 540,000 $ 1,230,000 $ 765,000 $ 2,535,0002a. Expected Cash Collections -Expected Cash Collections July August September Quarter June Sales $ 302,250 $ 302,250July Sales $ 162,000 $ 351,000 $ 513,000August Sales $ 369,000 $ 799,500 $ 1,168,500September Sales $ 229,500 $ 229,500Total Collections $ 464,250 $ 720,000 $ 1,029,000 $ 2,213,2503a. Estimated Production -Estimated Production July August September Quarter Sales (in Units) 36,000 82,000 51,000 169,000Add: Ending Finished Goods Inventory 12,300 7,650 3,900 3,900Total Needs 48,300 89,650 54,900 172,900Less: Beginning Finished Goods Inventory 5,400 12,300 7,650 5,400Total Production 42,900 77,350 47,250 167,5004a. Quantity of Gilden (in Feet) that needs to be Purchase -Quantity of Gilden (in Feet) that needs to be Purchase July August September Quarter Production 42,900 77,350 47,250 167,500Each Umbrella Requires (In Feet) 4 4 4 4Total Required Purchase 171,600 309,400 189,000 670,000Add: Ending Raw Material Inventory 154,700 94,500 47,950 47,950Total Needs 326,300 403,900 236,950 717,950Less: Beginning Raw Material Inventory 85,800 154,700 94,500 85,800Raw Material (Gilden) Purchase 240,500 249,200 142,450 632,1505a. Cost of Raw Material (Gilden) Purchase by Month and in Total -Cost of Raw Material (Gilden) Purchase by Month and in Total July August September Quarter Gilden Purchases 240,500 249,200 142,450 632,150GildenCost per Foot $ 0.80 $ 0.80 $ 0.80 $ 0.80Total Cost of Raw Material (Gilden) 192,400 199,360 113,960 505,7206a. Expected Cash Disbursements -Expected Cash Disbursements July August September Quarter June Purchases $ 44,790 $ 44,790July Purchases $ 72,150 $ 72,150 $ 144,300August Purchases $ 74,760 $ 74,760 $ 149,520September Purchases $ 42,735 $ 42,735Total Cash Disbursements $ 116,940 $ 146,910 $ 117,495 $ 381,345