Waterways Corporation is preparing its budget for the coming year, 2017. The fir
ID: 2464003 • Letter: W
Question
Waterways Corporation is preparing its budget for the coming year, 2017. The first step is to plan for the first quarter of that coming year. Waterways gathered the following information from the managers.
$12
Waterways likes 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, 2016, totaled $183,780.
10,355.0 lbs
Metal, plastic, and rubber together are 75¢ per pound per unit.
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 31, 2016, totaled $120,595. Raw Materials on December 31, 2016, totaled 11,295 pounds.
Other Information
The Cash balance on December 31, 2016, totaled $100,500, but management has decided it would like to maintain a cash balance of at least $800,000 beginning on January 31, 2017. 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 Romney’s 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. A $500,000 equipment purchase is planned for February.
a. For the first quarter of 2017, prepare a sales budget
b. For the first quarter of 2017, prepare a production budget.
c.For the first quarter of 2017, prepare a direct materials budget. (Round cost per pound to 2 decimal places, e.g. 0.25 and all other answers to 0 decimal places, e.g. 2,520.)
d. For the first quarter of 2017, prepare a direct labor budget. (Round time per unit to nearest hour, e.g. 30 minutes will be rounded to 0.5 hours)
e. For the first quarter of 2017, prepare a manufacturing overhead budget. (Round overhead rate to 2 decimal places, e.g. 5.25 and all other answers to 0 decimal places, e.g. 2,520. List Variable Costs first.)
f. For the first quarter of 2017, prepare a selling and administrative budget. (Enter per unit expenses rounded to 2 decimal places. E.g. 1.25)
g. For the first quarter of 2017, prepare a schedule for expected cash collections from customers. (Do not leave any answer field blank. Enter 0 for amounts.)
h.For the first quarter of 2017, prepare a schedule for expected payments for materials purchases. (Round answers to 0 decimal places, e.g. 2,520. Do not leave any answer field blank. Enter 0 for amounts.)
i.For the first quarter of 2017, prepare a cash budget. (Round answers to 0 decimal places, e.g. 2,520. Do not leave any answer field blank. Enter 0 for amounts.)
Sales Unit sales for November 2016 112,500 Unit sales for December 2016 102,100 Expected unit sales for January 2017 113,000 Expected unit sales for February 2017 112,500 Expected unit sales for March 2017 116,000 Expected unit sales for April 2017 125,000 Expected unit sales for May 2017 137,500 Unit selling price$12
Explanation / Answer
Solution:
a. Sales Budget for first quarter of 2017
Sales Budget For the first quarter of 2017
Particulars
January
February
March
Total
Budgeted Sales Unit
113,000
112,500
116,000
341,500
Unit Selling Price
$12
$12
$12
$12
Budgeted Sales in dollars
$1,356,000
$1,350,000
$1,392,000
$4,098,000
b. Production Budget for the first quarter of 2017
Production Budget For the first quarter of 2017
Particulars
January
February
March
Total
Budgeted Sales Unit
113,000
112,500
116,000
341,500
Add: Ending Inventory (10% of the next month’s unit sales)
11,250
11,600
12,500
35,350
Less: Beginning Inventory (Ending Inventory of Last Month)
(11300)
(11250)
(11,600)
(34,150)
Production Budget in Units
112,950
112,850
116,900
342,700
Working note for Production Budget For the first quarter of 2017
Particulars
November
December
January
February
March
April
Budgeted Sales Unit
112,500
102,100
113,000
112,500
116,000
125,000
Add: Ending Inventory (10% of the next month’s unit sales)
10,210
11,300
11,250
11,600
12,500
13,750
Less: Beginning Inventory (Ending Inventory of Last Month)
(10,210)
(11,300)
(11,250)
(11,600)
(12,500)
Production Budget in Units
103,190
112,950
112,850
116,900
126,250
C. Direct Material Budget for first quarter of 2017
Direct Material Purchase Budget for the first quarter of 2017
January
February
March
Total
Metal (in lb)
113,415
113,053
117,368
343,835
Total Metal Purchase Budget Cost (@ $0.58 per lb)
$65,780.70
$65,570.45
$68,073.15
$199,424.30
Plastic (in oz)
1,419,227
1,356,630
1,408,410
4,184,267
Total Plastic Purchase Budget Cost (@ $0.06 per oz)
$85,153.61
$81,397.80
$84,504.60
$251,056.01
Rubber (in oz)
473,075.625
452,210
469,470
1,394,756
Total Rubber Purchase Budget Cost (@ $0.05 per oz)
$23,653.78
$22,610.50
$23,473.50
$69,737.78
Working note for Direct Material Budget For the first quarter of 2017
Particulars
November
December
January
February
March
April
May
Budgeted Sales Unit
112,500
102,100
113,000
112,500
116,000
125,000
137,500
Add: Ending Inventory (10% of the next month’s unit sales)
10,210
11,300
11,250
11,600
12,500
13,750
Less: Beginning Inventory (Ending Inventory of Last Month)
(10,210)
(11,300)
(11,250)
(11,600)
(12,500)
(13,750)
Production Budget in Units
103,190
112,950
112,850
116,900
126,250
123,750
Raw Material (Metal) Requirement for Budgeted Production Units @ 1 lb per unit (in lb)
103,190
112,950
112,850
116,900
126,250
123,750
Add: Ending Inventory of Metal (5% of the materials needed for the next month)
5,177.5
5,642.50
5,845.00
6,312.50
6,187.50
0.00
Less: beginning Inventory of Metal (Ending Inventory of Last Month)
(5,177.50)
(5,642.50)
(5,845.00)
(6,312.50)
(6,187.50)
Direct Material (Metal) Purchase Budget (in lb)
113,415
113,053
117,368
126,125
117,563
Raw Material (Plastic) Requirement for Budgeted Production Units @ 12 oz per unit (in oz)
1,238,280
1,355,400
1,354,200
1,402,800
1,515,000
1,485,000
Add: Ending Inventory of Plastic (5% of the materials needed for the next month)
3,883.125
67,710.00
70,140.00
75,750.00
74,250.00
0
Less: beginning Inventory of Plastic (Ending Inventory of Last Month)
(3,883.13)
(67,710.00)
(70,140.00)
(75,750.00)
(74,250.00)
Direct Material (Plastic) Purchase Budget (in oz)
1,242,163
1,419,227
1,356,630
1,408,410
1,513,500
1,410,750
Raw Material (Rubber) Requirement for Budgeted Production Units @ 4 oz per unit (in oz)
412,760
451,800
451,400
467,600
505,000
495,000
Add: Ending Inventory of Rubber (5% of the materials needed for the next month)
1,294.375
22,570.00
23,380.00
25,250.00
24,750.00
0
Less: beginning Inventory of Rubber (Ending Inventory of Last Month)
(1,294.38)
(22,570.00)
(23,380.00)
(25,250.00)
(24,750.00)
Direct Material (Rubber) Purchase Budget (in oz)
414,054
473,076
452,210
469,470
504,500
470,250
d. Direct Labor Budget for first quarter of 2017
Direct Labor Budget For the first quarter of 2017
Particulars
January
February
March
Total
Production Budget in Units
112,950
112,850
116,900
342,700
Total Number of Direct Labor Hours required for Budgeted Production Units (@12 minute per unit)
22,590
22,570
23,380
68,540
Total Cost of Direct Labor (@$8 per Hour)
$180,720
$180,560
$187,040
$548,320
For rest part please ask separate questions..
Sales Budget For the first quarter of 2017
Particulars
January
February
March
Total
Budgeted Sales Unit
113,000
112,500
116,000
341,500
Unit Selling Price
$12
$12
$12
$12
Budgeted Sales in dollars
$1,356,000
$1,350,000
$1,392,000
$4,098,000
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