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 112,500

Unit sales for December 2019 102,100

Expected unit sales for January 2020 113,000

Expected unit sales for February 2020 112,500

Expected unit sales for March 2020 116,000

Expected unit sales for April 2020 125,000

Expected unit sales for May 2020 137,500

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, 2019, totalled $183,780

Direct materials cost 75 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, 2019 were 11,295 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 balance on December 31, 2019 was $120,595.

Direct Labor requires 12 minutes per unit for completion and is paid at a rate of $8 per hour

Manufacturing Overhead

Indirect materials 30 per labor hour

Indirect labor 50 per labor hour

Utilities 45 per labor hour

Maintenance 25 per labor hour

Salaries $42,000 per month

Depreciation $16,800 per month

Property taxes $ 2,675 per month

Insurance $ 1,200 per month

Janitorial $ 1,300 per month

Selling and Administrative Variable selling and administrative cost per unit is $1.60.

Advertising $15,000 a month

Insurance $ 1,400 a month

Salaries $72,000 a month

Depreciation $ 2,500 a month

Other fixed costs $ 3,000 a month

Other Information The Cash balance on December 31, 2019 is $100,500, 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 $2.50 per share for 5,000 shares outstanding. The company has an open line of credit with Crown Bank. The terms of the agreement require borrowing to be in $1,000 increments at 8% interest. Astro borrows on the first day of the month and repays on the last day of the month. A $500,000 equipment purchase is planned for February.

Questions

Prepare a Direct Materials budget

Prepare a Direct Labor Budget