The facts and figures relating to Irrigation Corporation are as follows. Irrigation Corporation produces plastic garden sprinklers. The company is preparing its budget for 2015. The first step is to plan for the first quarter of the coming year. Irrigation has collected the following information from the managers. 1. Sales: Sales for October 2014 Sales for November 2014 Sales for December 2014 Expected sales for January 2015 110,200 units 112,500 units 102,100 units 113,000 units Expected sales for February 2015 Expected sales for March 2015 Expected sales for April 2015 Expected sales for May 2015 Selling price per unit 112,500 units 116,000 units 125,000 units 137,500 units $12 Irrigation likes to keep 10% of the previous month's unit sales in ending inventory. All sales are on credit. 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, 2014, totaled $183,780. 2. Direct Materials: 2 pounds of direct materials is needed to produce one unit. Irrigation likes to keep 5% of the materials needed for the previous month's production in its ending inventory. Raw materials on hand on December 31, 2014, totaled 11,295 pounds. Payment for materials is made within 15 days. 50% is paid in the month of purchase, and 50% is| paid after the month of purchase. Accounts payable on December 31, 2014, totaled $120,595 3 Direct Labor Labor requires 12 minutes per unit for completion and is paid at a rate of 58 per hour. 4 Manufacturing Overhead Indirect materials Indirect labor Utilities Maintenance Factory supervisor's salary Factory Depreciation Property taxes Insurance Repairs 50.30 per labor hour 50.50 per labor hour $0.45 per labor hour $0.25 per labor hour S42,000 per month $16,800 per month $ 2,675 per month $ 1,200 per month $ 1,300 per month 5 Selling and Administrative expenses Salaries Advertising Insurance Office Depreciation Other fixed costs Commission $72,000 per month $15,000 per month $ 1,400 per month $ 2,500 per month $3,000 per month $0.25 per unit of sales Further information The cash balance on December 31, 2014, totaled $100,500, but management has decided it would like to maintain a cash balance of at least $800,000 beginning on January 31, 2015. Dividends are paid each month @ $2.50 per share for 5,000 shares. The company has an open line of credit with national Bank. The terms of the agreement require borrowing to be in the increments of $1,000, and the interest rate is 8%. Irrigation borrows on the first day of the month and repays on the last day of the month if possible. A $500,000 equipment purchase is planned for February 2015. Schedule of expected cash collections from customers Schedule for expected cash payments for materials purchases (h) Irrigation Corporation Sales Budget For the First Quarter Of 2015 January February March Total 113,000 112,500 116,000 341,500 $12.00 $12.00 $12.00 $12.00 $1,356,000.00 $1,350,000.00 $1,392,000.00 $4,098,000.00 Expected Sales (units) Sales Price per Unit Expected Sales Revenue Irrigation Corporation Production Budget For the First Quarter of 2015 IN UNITS January February Expected Sales 113,000 112,500 Planned Ending Inventory 10,210 11,300 Total Production Required 123,210 123,800 Beginning Inventory Of Finished Goods 11,250 10,210 Units to be Produced 111,960 113,590 March 116,000 11,250 127,250 11,300 115,950 Total 341,500 32,760 374,260 32,760 341,500 B N 1 Irrigation Corporation Direct Materials Purchase Budget 2 For the First Quarter of 2015 3 January February March Total 4 Expected production (units) 111,960 113,590 115,950 341,500 5 DM required (pounds) 2 2 2 2 6 Total DM for production 223,920 227,180 231,900 683,000 7 Add: closing inventory 11,285 11,196 11,359 33,840 8 Less: Beginning inventory 11,295 11,285 11,196 33,776 9 Total cost of direct material 223,910 227,091 232,063 683,064 10 1 Irrigation Corporation Direct Labor Budget 2 For the First Quarter of 2015 3 January February March 4 Budgeted production 111,960 113,590 115,950 5 * Labour per unit (per hour) 0.2 0.2 0.2 6 Total minutes 22,392 22,718 23,190 7 DL rate per hour 8 8 8 8 DL cost 179,136 181,744 185,520 9 10 Total 341,500 0.2 68,300 8 546,400 E Total March 23,190 68,300 C 1 Irrigation Corporation Manufacturing Overhead Budget 2 For the First Quarter of 2015 3 January February 4 Number of Labor Hours Required 22,392 22,718 5 Variable Manufacturing Overhead Costs 6 Indirect materials (0.30) per hour 6,717.6 6,815,4 7 Indirect labor (0.50) per hour 11,196 11,359 8 Utilities (0.45) per labor hour 10,076.4 10,223.1 9 Maintenance (0.25) per labor hour 5,598 5,679.5 10 Total Variable Manufacturing Overhead Costs 33,588 34,077 11 Fixed Manufacturing Overhead 12 Factory supervisor's salary 42,000 42,000 13 Factory Depreciation 16,800 16,800 14 Property taxes 2,675 2,675 15 Insurance 1,200 1,200 6,957 11,595 10,435.5 5,797.5 34,785 20,490 34,150 30,735 17,075 102,450 42,000 16,800 2,675 1,200 126,000 50,400 8,025 3,600 B D A 1 Fixed Manufacturing Overhead 2 Factory supervisor's salary 3 Factory Depreciation 4 Property taxes 5 Insurance 6 Repairs 7 Total Fixed Manufacturing Overhead Costs 8 Total manufacturing overhead budget 42,000 16,800 2,675 1,200 1,300 63,975 97,563 42,000 16,800 2,675 1,200 1,300 63,975 98,052 42,000 16,800 2,675 1,200 1,300 63,975 98,760 126,000 50,400 8,025 3,600 3,900 191,925 294,375 o 1 B 28,250 D 29,000 28,125 85,375 Total Variable Selling and Administrative cost Fixed Selling and Administrative cost Salaries Advertising Insurance 1 Office Depreciation 2 Other fixed costs 3 Total Fixed Selling and Administrative Costs Total Selling and Administrative Costs 5 72,000 15,000 1,400 2,500 3,000 93,900 122,150 72,000 15,000 1,400 2,500 3,000 93,900 122,025 72,000 15,000 1,400 2,500 3,000 93,900 122,900 216,000 45,000 4,200 7,500 9,000 281,700 367,075 4