Waterways for Chapter 9 Waterways Corporation is preparing its budget for the co
ID: 2402271 • Letter: W
Question
Waterways for Chapter 9
Waterways Corporation is preparing its budget for the coming year. The first step is to plan for the first quarter of that coming year. Waterways gathered the following information from the managers.
Sales:
Actual unit sates for November
113,500
Actual unit sales for December
103,100
Expected unit sales for January
114,000
Expected unit sales for February
113,500
Expected unit sales for March
116,000
Expected unit sales for April
126,000
Expected unit sales for May
138,500
Unit selling price
$12
Waterways wants to keep 10% of the next month’s unit sales in ending inventory. All sales are on account. 85% of the Accounts Receivable are collected in the month of sale and 15% of the Accounts Receivable are collected in the month after sale. Accounts receivable on December 31 totaled 183,780.
Direct Materials:
The product uses metal, plastic, and rubber. In total, each unit requires 2 pounds of material at an average cost of 0.75 per pound.
Waterways likes to keep 5% of the materials needed for the next month in its ending inventory. Payment for materials is made within 15 days. 50% is paid in the month of purchase and 50% is paid in the month after purchase. Accounts Payable on December totaled $120,595. Raw materials on December 31 totaled 11,295 pounds.
Direct Labor:
Labor requires 12 minutes per unit for completion and is paid at a rate of $18 per hour.
Manufacturing Overhead:
Indirect materials
30 cents per labor hour
Indirect labor
50 cents per labor hour
Utilities
45 cents per labor hour
Maintenance
25 cents per labor hour
Salaries
$52,000 per month
Depreciation
$16,800 per month
Property taxes
$2,675 per month
Insurance
$2,200 per month
Janitorial
$1,800 per month
Selling and Administrative Expenses:
Variable selling and administrative cost per unit is $2.40.
Advertising
$15,000 per month
Insurance
$1,400 per month
Salaries
$72,000 per month
Depreciation
$2,500 per month
Other fixed costs
$3,000 per month
Other Information:
The cash balance on December 31 totaled $220,500, but management has decided that it wants to maintain a cash balance of at least $750,000 beginning January 31. Dividends are paid each month at the rate of $2.50 per share for 5,000 shares outstanding. The company has an open line of credit with the First National Bank. The terms of the agreement requires borrowing to be in $1,000 increments at 8% interest. Waterways borrows on the first day of the month and repays on the last day of the month. Reserve repayment, if required, until Waterways can pay the entire amount. A $250,000 equipment purchase is planned for February.
Instructions (Do all parts):
Note: All budgets and schedules should be prepared by month for the first quarter (January, February, and March). Round all figures to the nearest dollar. For labor hours round to whole hours.
e. Prepare a manufacturing overhead budget.
f. Prepare a selling and administrative budget.
g. Prepare a schedule for expected cash collections from customers.
h. Prepare a schedule for expected payments for materials purchases.
i. Prepare a cash budget.
Actual unit sates for November
113,500
Actual unit sales for December
103,100
Expected unit sales for January
114,000
Expected unit sales for February
113,500
Expected unit sales for March
116,000
Expected unit sales for April
126,000
Expected unit sales for May
138,500
Unit selling price
$12
Explanation / Answer
Production Budget:
e. Manufacturing Overhead Budget:
f. Selling and Adminisrative Budget:
g. Schedule for Expected Cash Collections from Customers:
Direct Materials Purchases Budget:
h. Schedule of Expected Payments for Materials Purchases:
i.
January February March Expected Unit Sales 114,000 113,500 116,000 Desired Ending Inventory 11,350 11,600 12,600 Total Inventory Needs 125,350 125,100 128,600 Less: Beginning Inventory 11,400 11,350 11,600 Expected Production in Units 113,950 113,750 117,000Related Questions
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