Final answer:
The third quarter's total estimated sales for Milo Company are $1,415,000, and the expected cash collections total to $1,393,000, considering the collection pattern of sales.
Step-by-step explanation:
To calculate the estimated sales for Milo Company's beach umbrellas for the third quarter, we multiply the number of units estimated to be sold each month by the selling price per unit. For July, August, and September, the sales would be:
- July: 30,500 units × $10 = $305,000
- August: 71,000 units × $10 = $710,000
- September: 40,000 units × $10 = $400,000
The total estimated sales for the third quarter would be the sum of the monthly sales, which equals $1,415,000.
The expected cash collections for the third quarter are based on the pattern of sales collections: 30% in the month of sale, 65% in the following month, and the remaining subsequent to that (note that 5% is uncollectible). Including the June sales, the collections would be:
- July: ($200,000 × 65%) + ($305,000 × 30%) = $221,750
- August: ($305,000 × 65%) + ($710,000 × 30%) = $529,750
- September: ($710,000 × 65%) + ($400,000 × 30%) = $641,500
Total expected cash collections for the quarter are the sum of the monthly collections, which equals $1,393,000.