Let's go through each requirement step by step:
1. Calculate the estimated sales, by month and in total, for the third quarter.
Given sales information:
July: 35,000 units
August: 80,000 units
September: 49,000 units
Total: 164,000 units
Selling price per unit: $13
Estimated Sales:
July: 35,000 * $13 = $455,000
August: 80,000 * $13 = $1,040,000
September: 49,000 * $13 = $637,000
Total for the third quarter: $455,000 + $1,040,000 + $637,000 = $2,132,000
2. Calculate the expected cash collections, by month and in total, for the third quarter.
Based on the sales collection pattern:
30% in the month of sale
65% in the month following sale
5% uncollectible
Cash Collections:
July (30% of July sales): $455,000 * 0.3 = $136,500
August (65% of July sales): $455,000 * 0.65 = $295,750
September (65% of August sales): $1,040,000 * 0.65 = $676,000
October (30% of October sales): $637,000 * 0.3 = $191,100
November (65% of October sales): $637,000 * 0.65 = $414,050
December (65% of November sales): $637,000 * 0.65 = $414,050
Total cash collections for the third quarter: $136,500 + $295,750 + $676,000 + $191,100 + $414,050 + $414,050 = $2,127,450
3. Calculate the estimated quantity of beach umbrellas that need to be produced in July, August, September, and October.
Finished goods inventory requirement: 15% of the following month’s sales.
Production Needs:
July: 80,000 * 1.15 = 92,000 units
August: 49,000 * 1.15 = 56,350 units
September: 25,000 * 1.15 = 28,750 units
October: 11,500 * 1.15 = 13,225 units
4. Calculate the quantity of Gilden (in feet) that needs to be purchased by month and in total, for the third quarter.
Ending inventory requirement: 50% of the following month’s production needs.
Gilden Purchases:
July: (92,000 * 4) * 0.5 = 184,000 feet
August: (56,350 * 4) * 0.5 = 113,400 feet
September: (28,750 * 4) * 0.5 = 57,500 feet
October: (13,225 * 4) * 0.5 = 26,450 feet
5. Calculate the cost of the raw material (Gilden) purchases by month and in total, for the third quarter.
Cost per foot of Gilden: $0.60
Cost of Gilden Purchases:
July: $0.60 * 184,000 = $110,400
August: $0.60 * 113,400 = $68,040
September: $0.60 * 57,500 = $34,500
October: $0.60 * 26,450 = $15,870
Total cost of Gilden purchases for the third quarter: $110,400 + $68,040 + $34,500 + $15,870 = $229,810
6. Calculate the expected cash disbursements for raw material (Gilden) purchases, by month and in total, for the third quarter.
Half of a month’s purchases are paid in the month of purchase; the remainder is paid for in the following month.
Cash Disbursements for Gilden Purchases:
July: $110,400 * 0.5 = $55,200
August: $68,040 * 0.5 = $34,020
September: $34,500 * 0.5 = $17,250
October: $15,870 * 0.5 = $7,935
Total cash disbursements for Gilden purchases for the third quarter: $55,200 + $34,020 + $17,250 + $7,935 = $114,405
These calculations provide an overview of the estimated sales, cash collections, production needs, Gilden purchases, and associated costs for the third quarter.