Omar Inc. manufactures an advanced swim fin for scurba divers. Management is now

Question

Omar Inc. manufactures an advanced swim fin for scurba divers. Management is now preparing detailed budgets for the third quarter, July through September, and has assembled the following information to assist in preparing the budget:

A. The marketing department has estimated sales as follows for the remainder of the year (in pairs of swim fins): the selling price of the swim fins is $50 per pair.

July             7,000                   October               3,000

August       5,000                   November           3,000

September 4,000                   December           4,000

B. All sales are on account. Based on the past experience, the company has learned that 40% of a month’s of sales are collected in the month of sale, another 50% are collected in the month following sale, and the remaining 10% are collected in the second month of sale. May sales totaled $ 100,000 and June Sales $116,600.

C. The company maintains finished goods inventories equal to 10% of the following month’s sales.

D. Each pair of swim fins requires 2 pounds of geico compound. To prevent shortages, the company would like the inventory of geico compound on hand at the end of each month to be equal to 20% of the following month’s production needs. The ending inventory of geico compound is 1,160 pounds.

E. Geico compound costs $2.5 per pound.

7. You are required to prepare the following budgets using the information given in the question below to answers the questions

1. Budgeted sales in Dollars

2. Schedule of Expected cash collection

3. Production Budget

4. Direct Material Budget

You are required to add the following information:

1. What is the sales for the month of September?

2. What is the total sale for the third quarter?

3. What is the total amount of accounts receivables?

4. What is the cash collection for August?

5. What is the total cash collection for the third quarter?

6. What is the finished goods inventory on September 30 (Ending Inv.)?

7. What is the finished goods inventory on July 1 (beginning Inv.)?

8. What is the total required production for the third quarter?

9. What is the inventory on hand of gieco compound on July 1?

10. What is the cost of purchase the direct material (gieco compound) for July?

11. What is the total cost of Raw material (gieco compound) for the third quarter?

Explanation / Answer

a) july aug sep oct nov dec

sales 7000 5000 4000 3000 3000 4000

price /unit*50 50 50 50 50 50 50

total gross sale 350000 250000 200000 150000 150000 200000

2)tatal sale 200000

3)

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