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Waterways Corporation is preparing its budget for the coming year, 2022. The first step is to plan for the first quarter of that coming year.

Waterways Corporation is preparing its budget for the coming year, 2022. 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 2021 113,000
Unit sales for December 2021 102,000
Expected unit sales for January 2022 114,000
Expected unit sales for February 2022 111,000
Expected unit sales for March 2022 115,000
Expected unit sales for April 2022 125,000
Expected unit sales for May 2022 139,000
Unit 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, 2021, totaled $183,600. 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, 2021 totaled 11,370 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, 2021, totaled $120,595.

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

$14,000 a month

Insurance

$1,300 a month

Salaries

$74,000 a month

Depreciation

$2,800 a month

Other fixed costs

$2,900 a month

Other Information The Cash balance on December 31, 2021, totaled $102,000, but management has decided it would like to maintain a cash balance of at least $800,000 beginning on January 31, 2022. 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 Romneys 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 2022, prepare a sales budget.

(b) For the first quarter of 2022, prepare a production budget.

(c) For the first quarter of 2022, prepare a direst materials budget

(d) For the first quarter of 2022, prepare a direct labor budget

(e) For the first quarter of 2022, prepare a manufacturing overhead budget.

(f) For the first quarter of 2022, prepare a selling and administrative budget

(g) for the first quarter of 2022, prepare a schedule for expected cash collections from customers

(h) for the first quarter of 2022, prepare a schedule for expected payments for materials purchase.

(i) For the first quarter of 2022, prepare a cash budget.

  • a)Sales Budget:-

    January February March Total
    Unit Sales
    Unit Selling price
    Sales (in dollars)

    b)Production Budget:-

    January February March Total
    Unit Sales
    Add:-Desired ending inventory(10%of next month sales)
    Total units
    Less:-Inventory in hand(10% of current month)
    Units required to be produced

    c)Direct Materials(DM) Budget:-

    January February March Total
    Units required to be produced
    DM required per unit (in pounds)
    DM required for production (in pounds)

    Add:-Desired ending inventory

    (5% of next month requirement)

    Total DM (in pounds)
    Less:-DM inventory in hand at beginning
    DM required to be purchased (in pounds)
    DM cost per pound(in $)
    Total DM cost (in $)

    d)Direct Labor (DL) budget:-

    January February March Total
    Units required to be produced
    DL required per unit
    DL required for production
    DL cost per hour (in $)
    Total DL cost (in $)

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