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		90,000
Unit sales for March 2017		102,000
Expected unit sales for April 2017		110,000
Expected unit sales for May 2017		115,000
Expected unit sales for June 2017		120,000
Expected unit sales for July 2017		135,000
Expected unit sales for August 2017		160,000
Average unit selling price		$12

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 15,470 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 $122,400. Direct Labour Labour requires 15 minutes per unit for completion and is paid at an average rate of $10 per hour.

Manufacturing Overhead
Indirect materials		$0.00		per labour hour
Indirect labour		$0.60		per labour hour
Utilities		$0.50		per labour hour
Maintenance		$0.40		per labour hour
Salaries		$44,200		per month
Depreciation		$15,000		per month
Property taxes		$2,050		per month
Insurance		$1,450		per month
Janitorial		$2,600		per month

Selling and Administrative
Variable selling and administrative cost per unit is $1.60.
Advertising		$14,000	a month
Depreciation		$2,900	a month
Insurance		$1,400	a month
Other fixed costs		$3,100	a month
Salaries		$73,000	a month

Other Information The Cash balance on March 31 will be $149,500, but Waterways has decided it would like to maintain a cash balance of at least $500,000 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 4% interest. Borrowing is considered to be on the first day of the month and repayments are on the last day of the month. Assume interest is paid at the end of the quarter. In May, $790,000 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 sales budget. WATERWAYS CORPORATION British Columbia Production Plant Sales Budget for the 2nd Quarter, 2017 May June April Total 110,000 120,000 345,000 115,000 $ $ Sales in units Per unit selling price Total expected sales 12 12 12 12 $ $ 1,320,000 1,380,000 1,440,000 4,140,000 WATERWAYS CORPORATION British Columbia Production Plant Expected Cash Collections for the 2nd Quarter, 2017 April May June $ $ 612,000 Total Collections from March 612,000 April 660,000 660,000 April 660,000 660,000 690,000 May 690,000 May 690,000 690,000 June 720,000 $ $ 720,000 $ 1,410,000 Total cash collections 1,272,000 1,350,000 4,032,000 For the second quarter of 2017, prepare a production budget. WATERWAYS CORPORATION British Columbia Production Plant Production Budget for the 2nd Quarter, 2017 April May June Total Budgeted Unit Sales 110,000 115,000 120,000 345,000 Add 11,500 12,000 13,500 13,500 121,500 127,000 133,500 358,500 Ending Inventory Total Required Units Less Beginning Inventory Required Production Units -11,000 -11,500 -12,000 11,000 110,500 115,500 121,500 347,500 WATERWAYS CORPORATION British Columbia Production Plant Direct Materials Budget for the 2nd Quarter, 2017 April May June Total Units to be produced 110,500 115,500 121,500 347,500 Direct Materials Per Unit (kg) 1.40 1.40 1.40 1.40 Total Production Needs 154,700 161,700 170,100 486,500 Add : Ending Inventory 16,170 17,010 19,250 19,250 170,870 178,710 189,350 505,750 Less Beginning Inventory 15,470 16,170 17,010 15,470 Total Materials Required 155,400 162,540 172,340 490,280 Cost Per Kg 1.50 1.50 to 1.50 $ 1.50 Total Cost of Purchases 233,100 $ 243,810 $ 258,510 $ 735,420 WATERWAYS CORPORATION British Columbia Production Plant Expected DM Cash Disbursements for the 2nd Quarter, 2017 April May June $ $ 122,400 Total $ $ Disbursements from March 122,400 April 116,550 116,550 April 116,550 116,550 May 121,905 121,905 May 121,905 121,905 June 129,255 129,255 $ Total payments 238,950 238,455 251,160 728,565 WATERWAYS CORPORATION British Columbia Production Plant Labour Budget for the 2nd Quarter, 2017 April May June Total Units to be produced 110,500 115,500 121,500 347,500 Direct Labour Time (Hours) Per Unit 0.25 0.25 0.25 0.25 Total Required Direct Labour Hours 27,625 28,875 30,375 86,875 Direct Labour Cost Per Hour 10 101 10 10 Total Direct Labour Cost 276,250 $ 288,750 303,750 $ 868,750 (g) 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 O decimal places, e.g. 2,275.) WATERWAYS CORPORATION British Columbia Production Plant Manufacturing Overhead Budget for the 2nd Quarter, 2017 April May June Total Expected Direct Labour Hours Variable Rate $ $ Total Variable Manufacturing Overhead $ $L $ Add v . Fixed Overhead Total Manufacturing Overhead Less: Non-Cash Items Cash Outflow for Manufacturing Overhead