Waterways Continuing Problem 09

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.

Unit sales for November 2016 112,500

Unit sales for December 2016 102,100

Expected unit sales for January 2017 113,000

Expected unit sales for February 2017 112,500

Expected unit sales for March 2017116,000

Expected unit sales for April 2017 125,000

Expected unit sales for May 2017 137,500Unit 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, 2016, totaled $183,780.

Metal		1 lb @ 58 per lb.
Plastic		12 oz @ 6 per oz
Rubber		4 oz @ 5 per oz
		2 lbs per unit

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.

Indirect materials		30		per labor hour
Indirect labor		50		per labor hour
Utilities		45		per labor hour
Maintenance		25		per labor hour
Salaries		$42,000		per month
Depreciation		$16,800		per month
Property taxes		$2,675		per month
Insurance		$1,200		per month
Maintenance		$1,300		per month

Variable selling and administrative cost per unit is $1.60.

Advertising$15,000 a month

Insurance$1,400 a month

Salaries$72,000 a month

Depreciation$2,500 a month

Other fixed costs$3,000 a 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 Romneys 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.

For the first quarter of 2017, prepare a production budget.

For the first quarter of 2017, prepare a direct materials budget.

For the first quarter of 2017, prepare a manufacturing overhead budget.

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

For the first quarter of 2017, prepare a schedule for expected payments for materials purchases.

For the first quarter of 2017, prepare a cash budget.