Question 5

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.

SalesUnit sales for November 2016112,500Unit sales for December 2016102,100Expected unit sales for January 2017113,000Expected unit sales for February 2017112,500Expected unit sales for March 2017116,000Expected unit sales for April 2017125,000Expected unit sales for May 2017137,500Unit selling price$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.

Direct MaterialsItemAmount Used per UnitInventory, Dec. 31Metal1 lb @ 58 per lb.5,177.5 lbsPlastic12 oz @ 6 per oz3,883.125 lbsRubber4 oz @ 5 per oz1,294.375 lbs2 lbs per unit10,355.0 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.

Direct LaborLabor requires 12 minutes per unit for completion and is paid at a rate of $8 per hour.

Manufacturing OverheadIndirect materials30per labor hourIndirect labor50per labor hourUtilities45

per labor hourMaintenance25

per labor hourSalaries$42,000per monthDepreciation$16,800per monthProperty taxes$2,675per monthInsurance$1,200per monthMaintenance$1,300per month

Selling and AdministrativeVariable selling and administrative cost per unit is $1.60.Advertising$15,000a monthInsurance$1,400a monthSalaries$72,000a monthDepreciation$2,500a monthOther fixed costs$3,000a month

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.

Q

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For the first quarter of 2017, schedule for expected cash collections from customers.