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 111,000 101,000 113,000 113,000 118,000 124,000 137,000 $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 11,300 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 $102,740. Direct Labor Labor requires 12 minutes per unit for completion and is paid at a rate of $6 per hour. Manufacturing Overhead Indirect materials per labor hour Indirect labor per labor hour Utilities per labor hour per labor hour Maintenance Salaries 30 50 50 30 $42,000 $17,300 $2,600 $1,300 $1,200 per month per month Depreciation Property taxes Insurance per month per month Maintenance per month Selling and Administrative Variable selling and administrative cost per unit is $1.40. Advertising $15,000 a month Insurance $1,300 a month Salaries $71,000 a month Depreciation $2,600 a month Other fixed costs $2,700 a month Other Information The Cash balance on December 31, 2019, totaled $103,000, but management has decided it would like to maintain a cash balance of at least $800,000 beginning on January 31, 2020. Dividends are paid each month at the rate of $2.30 per share for 4,940 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 6% interest. Waterways borrows on the first day of the month and repays on the last day of the month. A $480,000 equipment purchase is planned for February. For the first quarter of 2020, prepare a production budget. WATERWAYS CORPORATION Production Budget First Quarter February March January Quarter : rect materials budget. (Round cost per pound to 2 decimal places, e.g. 0.25 and all other answers to 0 decima Required Production Units Total Materials Required Expected Unit Sales Beginning Direct Materials Direct Materials Purchases Desired Ending Direct Materials Desired Ending Finished Goods Unit Total Required Units Direct Materials Per Unit Beginning Finished Goods Unit WATERWAYS CORPORATION Direct Materials Budget First Quarter January February March Quarter 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 0 decimal places, e.g. 2,520. WATERWAYS CORPORATION Direct Materials Budget First Quarter February March January Quarter . Desired Ending Inventory Beginning Materials Inventory Direct Materials Purchases Cost Per Pound Total Materials Required Total Required Direct Labor Hours Units to be produced Direct Materials Per Unit Direct Labor Cost Per Hour Direct Labor Time Per Unit Total Cost of Direct Materials Purchases Total Direct Labor Cost Total Pounds Required for Production $ labor budget. (Round time per unit to nearest hour, e.g. 30 minutes will be rounded to 0.5 hours) NATERWAYS CORPORATION Direct Labor Budget