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 budgetpreparation:a. The Marketing Department has estimated sales as follows for the remainder of the year (in units):JulyAugustSeptember30,00070,000November50,000 DecemberThe selling price of the beach umbrellas is $12 per unit.b. All sales are on account. Based on past experience, sales are collected in the following pattern:June 30October30% in the month of sale65% in the month following sale5% uncollectibleSeptember 30Sales 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% ofthe following month's production needs. The inventory of Gilden on hand at the beginning and end of the quarter will be:72,000 feetfeet20,00010,00010,000?page 400e. 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 onJuly 1 for purchases of Gilden during June will be $76,000. The company is in the process of preparing a budget for May and has assembled the following data:a. Sales are budgeted at $200,000 for May. Of these sales, $60,000 will be for cash; the remainder will be credit sales. One-half of a month's credit sales are collected in the month thesales are made, and the remainder is collected in the following month. All of the April 30 accounts receivable will be collected in May.b. Purchases of inventory are expected to total $120,000 during May. These purchases will all be on account. Forty percent of all purchases are paid for in the month of purchase; theremainder are paid in the following month. All of the April 30 accounts payable to suppliers will be paid during May.c. The May 31 inventory balance is budgeted at $40,000.d. Selling and administrative expenses for May are budgeted at $72,000, exclusive of depreciation. These expenses will be paid in cash. Depreciation is budgeted at $2,000 for themonth.e. The note payable on the April 30 balance sheet will be paid during May, with $100 in interest. (All of the interest relates to May.)f. New refrigerating equipment costing $6,500 will be purchased for cash during May.g. During May, the company will borrow $20,000 from its bank by giving a new note payable to the bank for that amount. The new note will be due in one year.Required:1. Calculate the expected cash collections from customers for May.2. Calculate the expected cash disbursements for merchandise purchases for May.3. Prepare a cash budget for May.4. Using Schedule 9 as your guide, prepare a budgeted income statement for May.5. Prepare a budgeted balance sheet as of May 31.

Budgeting - Budgeting is the process of estimating future operations based on past performance. %…

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): July August September 30,000 October 70,000 November 50,000 December The selling price of the beach umbrellas is $12 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 June 30 September 30 72,000 feet feet 20,000 10,000 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: ? 10,000 page 400 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.

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter7: Budgeting

Section: Chapter Questions

Problem 3PB: TIB makes custom guitars and prepared the following sales budget for the second quarter It also has...