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 113,000

Unit sales for December 2019 102,000

Expected unit sales for January 2020 114,000

Expected unit sales for February 2020 111,000

Expected unit sales for March 2020 115,000

Expected unit sales for April 2020 125,000

Expected unit sales for May 2020 139,000

Unit selling price $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 $183,600.

Direct Materials

Direct materials cost80cents 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, totaled11,370pounds. 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 $103,725.

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 50 per labor hour

Maintenance 20 per labor hour

Salaries $42,000 per month

Depreciation $15,100 per month

Property taxes $3,000 per month

Insurance $1,100 per month

Maintenance $1,300 per month

Selling and Administrative

Variable selling and administrative cost per unit is $1.50.

Advertising $14,000a month

Insurance $1,300a month

Salaries $74,000a month

Depreciation $2,800a month

Other fixed costs $2,900a 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 $800,000 beginning on January 31, 2020. Dividends are paid each month at the rate of $2.30 per share for 4,750 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 $450,000 equipment purchase is planned for February.

(a)

For the first quarter of 2020, prepare a sales budget.

WATERWAYS CORPORATION

Sales Budget

(March 2020F / or the First Quarter of 2020/ For the Month Ending March 2020)

First Quarter

January February March Quarter

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