Waterways Continuing Problem-10 (Part Level Submission)

Waterways Corporation has recently acquired a small manufacturing operation in British Columbia that produces one of its more popular items. This plant will provide these units for resale in retail hardware stores in British Columbia and Alberta. Because the budget prepared by the plant was incomplete, Jordan Leigh, Waterways CFO, was sent to B.C. to oversee the plants budgeting process for the second quarter of 2017.

Jordan asked the various managers to collect the following information for preparing the second-quarter budget.

Sales
Unit sales for February 2017	91,000
Unit sales for March 2017	103,000
Expected unit sales for April 2017	111,000
Expected unit sales for May 2017	116,000
Expected unit sales for June 2017	121,000
Expected unit sales for July 2017	136,000
Expected unit sales for August 2017	161,000
Average unit selling price	$14

Based on the experience from the home plant, Jordan has suggested that the B.C. plant keep 10% of the next months unit sales in ending inventory. The plant has contracts with some of the major home hardware giants, so all sales are on account; 50% of the accounts receivable is collected in the month of sale, and the balance is collected in the month after sale. This was the same collection pattern from the previous year. The new plant has no bad debts.

Direct Materials

The combined quantity of direct materials (consisting of metal, plastic and rubber) used in each unit is 1.40 kg. Metal, plastic, and rubber together amount to $1.50 per kg. Inventory of combined direct material on March 31 consisted of 15,610 kg.

This plant likes to keep 10% of the materials needed for the next month in its ending inventory. Fifty percent of the payables is paid in the month of purchase, and 50% is paid in the month after purchase.

Accounts Payable on March 31 will total $126,600.

Direct Labour

Labour requires 15 minutes per unit for completion and is paid at an average rate of $20 per hour.

Manufacturing Overhead
Indirect materials	$0.20	per labor hour
Indirect labor	$0.50	per labor hour
Utilities	$0.50	per labor hour
Maintenance	$0.40	per labor hour
Salaries	$44,800	per month
Depreciation	$16,800	per month
Property taxes	$2,450	per month
Insurance	$1,300	per month
Janitorial	$2,200	per month

Selling and Administrative
Variable selling and administrative cost per unit is $1.50.
Advertising	$16,000	a month
Depreciation	$2,100	a month
Insurance	$1,300	a month
Other fixed costs	$3,500	a month
Salaries	$77,000	a month

Other Information

The Cash balance on March 31 will be $108,000, but Waterways has decided it would like to maintain a cash balance of at least $300,000 beginning on April 30. The company has an open line of credit with its bank. The terms of the agreement require borrowing to be in $1,000 increments at 2% interest. Borrowing is considered to be on the first day of the month and repayments are on the last day of the month.

In May, $730,000 of new equipment to update operations will be purchased.

Three months insurance is prepaid on the first day of the first month of the quarter.

For the second quarter of 2017, prepare a manufacturing overhead budget. (Round variable overhead rate to 2 decimal places, e.g. 5.25 and all other answers to 0 decimal places, e.g. 2,275.)

WATERWAYS CORPORATION British Columbia Production Plant Manufacturing Overhead Budget for the 2nd Quarter, 2017
April	May	June	Total
Variable RateCash Outflow for Manufacturing OverheadTotal Variable Manufacturing OverheadExpected Direct Labour HourNon-Cash ItemsFixed OverheadTotal Manufacturing Overhead
Variable RateNon-Cash ItemsCash Outflow for Manufacturing OverheadFixed OverheadTotal Variable Manufacturing OverheadExpected Direct Labour HourTotal Manufacturing Overhead	$	$	$	$
Cash Outflow for Manufacturing OverheadNon-Cash ItemsExpected Direct Labour HourVariable RateTotal Variable Manufacturing OverheadFixed OverheadTotal Manufacturing Overhead	$	$	$	$
AddLess: Variable RateTotal Variable Manufacturing OverheadTotal Manufacturing OverheadFixed OverheadNon-Cash ItemsCash Outflow for Manufacturing OverheadExpected Direct Labour Hour
Expected Direct Labour HourTotal Variable Manufacturing OverheadCash Outflow for Manufacturing OverheadFixed OverheadTotal Manufacturing OverheadVariable RateNon-Cash Items
AddLessEAT_1425453183322_1_0187982152096398: Non-Cash ItemsCash Outflow for Manufacturing OverheadTotal Manufacturing OverheadFixed OverheadExpected Direct Labour HourVariable RateTotal Variable Manufacturing OverheadEAT_1425453134163_1_4595644181411882
Total Variable Manufacturing OverheadTotal Manufacturing OverheadExpected Direct Labour HourCash Outflow for Manufacturing OverheadFixed OverheadVariable RateNon-Cash ItemsEAT_1425453134163_1_4805515636862934	$	$	$	$