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 Unit sales for December 2019 Expected unit sales for January 2020 Expected unit sales for February 2020 Expected unit sales for March 2020 Expected unit sales for April 2020 Expected unit sales for May 2020 Unit selling price 114,000 101,000 112,000 113,000 117,000 126,000 138,000 $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, 2019, totaled $181,800. 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 11,210 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 $102,600. 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 40 per labor hour Maintenance 30 per labor hour Salaries $41,000 per month Depreciation $16,400 per month Property taxes $2,800 per month Insurance $1,200 per month Maintenance $1,200 per month Selling and Administrative Variable selling and administrative cost per unit is $1.70. Advertising $14,000 a month Insurance $1,300 a month Salaries $73,000 a month Depreciation $2,800 a month Other fixed costs $2,800 a month Other Information The Cash balance on December 31, 2019, totaled $102,000, 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 $2.30 per share for 5,140 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 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. For the first quarter of 2020, prepare a sales budget. WATERWAYS CORPORATION Sales Budget For the First Quarter of 2020 A First Quarter January February March Quarter Expected Unit Sales , 112,000 113,000 117,000 342,000 Unit Selling Price 12.00 12.00 $ 12.00 $ 12.00 Total Sales A $ 1,344,000 $ 1,356,000 1,404,000 4,104,000 For the first quarter of 2020, prepare a production budget. WATERWAYS CORPORATION Production Budget For the First Quarter of 2020 A First Quarter January February March Quarter Expected Unit Sales 112,000 113,000 117,000 Add A . Desired Ending Finished Goods Unit A 11,300 11,700 12,600 Total Required Units 123,300 124,700 129,600 Less A. Beginning Finished Goods Unit 11,200 11,300 11,700 Required Production Units 112,100 113,400 117,900 343,400 For the first quarter of 2020, prepare a direct materials budget. (Round cost per pound to 2 decimal places, e.g. 0.25 and all other answers to O decimal places, e.g. 2,520.) WATERWAYS CORPORATION Direct Materials Budget For the First Quarter of 2020 First Quarter January February March Quarter Units to be produced 112,100 113,400 117,900 Direct Materials Per Unit 2 2 Total Pounds Required for Production 224,200 226,800 235,800 Add : Desired Ending Inventory 11,340 11,790 12,720 Total Materials Required 235,540 238,590 248,520 Less : Beginning Materials Inventory 11,210 11,340 11,790 Direct Materials Purchases 224,330 227,250 236,730 Cost Per Pound 0.80 $ 0.80 $ 0.80 Total Cost of Direct Materials Purchases $ 179,464 $ 181,800 $ 189,384 550,648 For the first quarter of 2020, prepare a direct labor budget. (Round time per unit to nearest hour, e.g. 30 minutes will be rounded to 0.5 hours) WATERWAYS CORPORATION Direct Labor Budget For the First Quarter of 2020 First Quarter January February March Ci Quarter Units to be produced 112,100 113,400 343,400 117,900 0.2 Direct Labor Time (Hours) Per Unit 0.2 0.2 22,420 0.2 22,680 Total Required Direct Labor Hours 23,580 68,680 Direct Labor Cost Per Hour $ Total Direct Labor Cost $ 201,780 $ 204,120 $ 212,220 $ 618,120 For the first quarter of 2020, 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.) WATERWAYS CORPORATION Manufacturing Overhead Budget For the First Quarter of 2020 First Quarter January February March Quarter Variable Costs Indirect Materials 6,726 6,804 7,074 $ 20,604 Indirect Labor 11,210 11,340 11,790 34,340 Utilities 8,968 9,072 9,432 27,472 Maintenance 6,726 6,804 7,074 20,604 Total Variable Cost 33,630 34,020 35,370 103,020 Fixed Costs Salaries 41,000 41,000 41,000 123,000 Depreciation 16,400 16,400 16,400 49,200 Property Taxes 2,800 2,800 2,800 8,400 Insurance 1,200 1,200 1,200 3,600 Maintenance 1,200 1,200 1,200 3,600 Total Fixed Costs 62,600 62,600 $ 62,600 $ 187,800 Total Manufacturing Overhead 96,230 96,620 97,970 290,820 Direct Labor Hours 22,420 22,680 23,580 68,680 Predetermined overhead rate for the quarter A 4.23 For the first quarter of 2020, prepare a selling and administrative budget. (Enter per unit expenses rounded to 2 decimal places. E.g. 1.25) WATERWAYS CORPORATION Selling and Administrative Expense Budget For the First Quarter of 2020 First Quarter January February March Quarter Budget Sales In Units 112,000 113,000 117,000 342,000 Variable Expenses Per Unit 1.70 1.70 $ 1.70 $ 1.70 U Total Variable S & A Expense 4 112,002 113,002 117,002 342,002 U Fixed Expenses Advertising 14,000 14,000 14,000 42,000 Insurance 1,300 1,300 1,300 3,900 Salaries 73,000 73,000 73,000 219,000 Depreciation 2,800 2,800 2,800 8,400 Other 2,800 2,800 2,800 8,400 Total Fixed Expenses 93,900 93,900 93,900 281,700 Total S & A Expenses 205,902 206,902 $ 210,902 $ 623,702 For the first quarter of 2020, prepare a schedule for expected cash collections from customers. Schedule of Expected Collections from Customers January February March Quarter Accounts receivable, 12/31/19 181,800 $ 181,800 January sales 1,142,400 201,600 1,344,000 February sales 1,152,600 203,400 1,356,000 March sales 1,193,400 1,193,400 Total cash collections 1,324,200 $ 1,354,200 $ 1,396,800 $ 4,075,200 For the first quarter of 2020, prepare a schedule for expected payments for materials purchases. (Round answers to 0 decimal places, e.g. 2,520.) Schedule of Expected Cash Payments for Purchases January February March Accounts payable, 12/31/19 102,600 Quarter 102,600 January 89,732 89,732 179,464 February 90,900 90,900 181,800 March 94,692 94692 Total payments $ 192,332 $ 180,632 $ 185,592 $ 558,556 For the first quarter of 2020, prepare a cash budget. (Round answers to 0 decimal places, e.g. 2,520.) WATERWAYS CORPORATION Cash Budget For the First Quarter of 2020 First Quarter January February March Quarter Beginning Cash Balance 102,000 102,000 Add 4: Receipts Collections From Customers Total Available Cash Less : Disbursements Direct Materials Direct Labor Manufacturing Overhead Selling And Administrative Equipment Purchase Dividends Total Disbursements Excess (Deficiency) Of Available Cash Over Cash Disbursements Financing Add 4: Borrowings Less : Repayments Interest Ending Cash Balance