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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. Waterways gathered the following information from the managers.

Sales
Unit sales for November 2021 114,000
Unit sales for December 2021 103,000
Expected unit sales for January 2022 114,000
Expected unit sales for February 2022 111,000
Expected unit sales for March 2022 116,000
Expected unit sales for April 2022 125,000
Expected unit sales for May 2022 136,000
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 $185,400.

Direct Materials

Item

Amount Used per Unit

Inventory, Dec. 31

Metal

1 lb @ 58 per lb. 5,177.5 lbs

Plastic

12 oz @ 6 per oz 3,883.125 lbs

Rubber

4 oz @ 5 per oz 1,294.375 lbs
2 lbs per unit 10,355.0 lbs

Metal, plastic, and rubber together are 80 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, 2021, totaled $104,580. Raw Materials on December 31, 2021, totaled 11,370 pounds.

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 40 per labor hour
Maintenance 30 per labor hour
Salaries $41,000 per month
Depreciation $17,900 per month
Property taxes $2,400 per month
Insurance $1,300 per month
Maintenance $1,200 per month

Selling and Administrative
Variable selling and administrative cost per unit is $1.70.
Advertising $16,000 a month
Insurance $1,300 a month
Salaries $72,000 a month
Depreciation $2,600 a month
Other fixed costs $3,100 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 $700,000 beginning on January 31, 2022. Dividends are paid each month at the rate of $2.60 per share for 5,280 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 $490,000 equipment purchase is planned for February.

(a)

For the first quarter of 2022, prepare a sales budget.

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