FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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Milo Company manufactures beach umbrellas. The company is preparing budgets for the third quarter and assembled the following information:
The Marketing Department estimated unit sales as follows for the remainder of the year:
July 33,000 October 23,000
August 76,000 November 9,500
September 45,000 December 10,000
The selling price of the beach umbrellas is $15 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 $375,000.
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 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 78,900 feet
September 30 ?question mark 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 $39,390.
Required: 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.
SAVE
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