Celtic Wood Products Limited $($Celtic$)$ manufactures wooden shelves and mirrors. Sales quantities are estimated based on results from previous years.

Estimated Sales of Shelves in Units for $2025$

January $7,800$ July $6,200$ January$/267,900$

February $7,700$ August $6,200$ February$/267,900$

March $6,200$ September $7,500$

April $6,200$ October $7\mathrm{.}500$

May $6,200$ November $8,000$

June $6,200$ December $8,500$

Estimated Sales of Mirrors in Units for $2025$

January $4,900$ July $5,000$ January$/264,400$

February $5,200$ August $5,000$ February$/264,900$

March $6,400$ September $6,500$

April $5,200$ October $6,700$

May $5,200$ November $6,800$

June $5,000$ December $6,900$

Estimated Custom Milling in $$$ for $2025$

Month Cash Received Month Work Started & Completed

December$/24$ $$12,000$ February

April$/25$ $$20,000$ May

July$/25$ $$25,000$ September

December$/25$ $$30,000$ January$/26$

Celtic wholesales the Shelves at $$30$ each and the mirrors at $$38$ each. All sales are on credit with terms of $2/$eom$,$ n$30.$ Historically, $40\%$ of the accounts receivable is paid within the discount period by month end. $40\%$ are paid in the month following sale and the remainder are paid in the second month following sale. Bad debts of $1\mathrm{.}5\%$ are usually encountered.

In addition, they do Custom Milling. For all custom milling jobs, they insist that the total amount of the job be received in full before starting the job. The customer has to supply all the raw materials, so the only prime cost that Celtic incurs on these jobs is Direct Labour. The mark up on these jobs is $100\%$ of direct labour cost $($before any benefits are factored in$).$ No sales discounts apply to these jobs and there are no bad debts applicable as the customer has paid in full before work is commenced.

The $$actual$$ balance sheet as at December $31,2024$ is attached. Do not recalculate any of the numbers in the opening balance sheet. Take them as $$Given$.$

Materials, Inventory, & Labour

Each shelf requires $4\mathrm{.}0$ board feet of wood, which costs $$3$ per board foot and $$0\mathrm{.}50$ of indirect materials. The mirrors require $4\mathrm{.}0$ board feet of wood, which costs $$3$ per board foot and $1$ mirror which costs $$5$ each as well as indirect materials of $$1$ per mirror. Commencing January, $2025,$ management wishes the ending balance in direct materials inventory to equal $20\%$ of the following month$$s production requirements. $($Ignore indirect materials when calculating direct materials inventory.$)$ Management also expects finished goods inventory to equal $40\%$ of the following month$$s sales.

Purchases of direct materials are all made on credit and $40\%$ are paid in the month of purchase with the remaining balance paid in the month following purchase.

Each shelf requires $48$ minutes of direct labour and the mirror also requires $48$ minutes. Average wage rates are $$11$ per hour plus $22\%$ for employee benefits. The wages are all paid in the month incurred, however, the benefits are paid the month following.

Warranty:

As the company is dedicated to quality, it offers a $3$ month full warranty. Based on past results, the company expects that it will have warranty expenses equal to $1\%$ of sales on its products.

Past experience dictates that it reimburses their customers for the warranty claims by reimbursing the customers the money paid to them. The payment pattern is as follows:

$1$st month after sale $30\%$

$2$nd month after sale $20\%$

$3$rd month after sale $50\%.$

NOTE: Assume all of the opening balance in warranty payable is paid out equally in the first three months of $2025.$

The company expects to incur the following factory overhead:

Indirect materials as outlined above

Utilities $$4,000$ per month

Indirect labour $($See Note Below$)$ $$8,000$ per month

Benefits on indirect labour $22\%$ of indirect labour

Rent $$15,000$ per month

Equipment depreciation $($See Note Below$)$ $$2,500$ per month

Repairs & maintenance $$1,250$ per month

Factory insurance $$1,000$ per month.

Note regarding Indirect Labour:

Normal indirect labour is $$8,000$ per month. However, if the total number of direct labour hours equals or exceeds $10,600$ hours, the company will hire an additional part$-$time supervisor at a cost of $$3,000$ per month. The number of direct labour hours must also include the DL hours incurred in doing the milling work.

Note regarding Equipment Depreciation:

On April $1,2025,$ the company plans to purchase and pay for a $$100,000$ piece of manufacturing equipment. The $$2,500$ per month depreciation expense represents depreciation on all equipment except the above noted acquisition. For the new equipment, it is expected to have an estimated useful life of $5$ years and a salvage value of $$10,000.$ The company uses straight$-$line depreciation.

The timing of the payments for factory overhead is as follows:

$$ Indirect materials, utilities, indirect labour, rent and repairs & maintenance are paid in the month incurred.

$$ Benefits on indirect labour are paid in the following m