*Waterways continuing problem 09

Waterways Corporation is preparing its budget for the coming year, 2020. The first step is to plan for the first quarter of that coming year. The company has gathered information from its managers in preparation of the budgeting process.

Sales:

Unit sales for November 2019 ___111,000Unit sales for December 2019 ___103,000

Expected unit sales for January 2020 ___ 114,000

Expected unit sales for February 2020 ___ 112,000

Expected unit sales for March 2020 ___ 116,000

Expected unit sales for April 2020 ___ 124,000

Expected unit sales for May 2020 __ 137,000 Unit selling price __$12

Waterways likes to keep 10% of the next months 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, 2019, totaled $185,400.

Direct Materials

Direct materials cost 80 cents per pound. Two pounds of direct materials are required to produce each unit.

Waterways likes to keep 5% of the materials needed for the next month in its ending inventory. Raw Materials on December 31, 2019, totaled 11,380 pounds. 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, 2019, totaled $104,585.

Direct Labor

Labor requires 12 minutes per unit for completion and is paid at a rate of $9 per hour.

Manufacturing Overhead

Indirect materials __30 per labor hour

Indirect labor __ 50 per labor hour

Utilities ___ 50 per labor hour

Maintenance ___30 per labor hour

Salaries __$41,000 per month

Depreciation __$17,800 per month

Property taxes __ $2,800 per month

Insurance __$1,100 per month

Maintenance __$1,400 per month

Selling and Administrative

Variable selling and administrative cost per unit is $1.70.

Advertising ___$16,000 a month

Insurance ___$1,500 a month

Salaries __$71,000 a month

Depreciation __$2,700 a month

Other fixed costs __ $3,200 a month

Other Information:

The Cash balance on December 31, 2019, totaled $100,000, but management has decided it would like to maintain a cash balance of at least $700,000 beginning on January 31, 2020. Dividends are paid each month at the rate of $2.70 per share for 5,180 shares outstanding. The company has an open line of credit with Romneys Bank. The terms of the agreement requires borrowing to be in $1,000 increments at 9% interest. Waterways borrows on the first day of the month and repays on the last day of the month. A $550,000 equipment purchase is planned for February.

Question1: For the first quarter of 2020, prepare a sales budget.

Question2: For the first quarter of 2020, prepare a production busget.

Question3: For the first quarter of 2020, prepare a direct materials budget.

Question4: For the first quarter of 2020, prepare a direct labor budget.

Question5: For the first quarter of 2020, prepare a manufacturing overhead budget.

Question6: For the first quarter of 2020, prepare a selling and administrative budget.

Question7: For the first quarter of 2020, prepare a schedule for expected cash collections from customers.

Question8: For the first quarter of 2020, prepare a schedule for expected payments for materials purchases.

Question9: For the first quarter of 2020, prepare a cash budget.