WCP9 Waterways Corporation is preparing its budget for the coming year, 2014. 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 2013 112,500 Unit sales for December 2013 102,100 Expected unit sales for January 2014 113,000 Expected unit sales for February 2014 112,500 Expected unit sales for March 2014 116,000 Expected unit sales for April 2014 125,000 Expected unit sales for May 2014 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, 2013, totaled $183,780. 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 75 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, 2013, totaled $120,595. Raw Materials on December 31, 2013, totaled 11,295 pounds. Direct Labor 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 Waterways Continuing Problem 11 Other Information The Cash balance on December 31, 2013, totaled $100,500, but management has decided it would like to maintain a cash balance of at least $800,000 beginning on January 31, 2014. 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 Romneys Bank. The terms of the agreement requires borrowing to be in $1,000 increments at 8% interest. Waterways 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. Instructions For the first quarter of 2014, do the following. (a) Prepare a sales budget. (b) Prepare a production budget. (c) Prepare a direct materials budget. (Round to nearest dollar) (d) Prepare a direct labor budget. (For calculations, round to the nearest hour.) (e) Prepare a manufacturing overhead budget. (Round amounts to the nearest dollar.) (f) Prepare a selling and administrative budget. (g) Prepare a schedule for expected cash collections from customers. (h) Prepare a schedule for expected payments for materials purchases. (Round totals to nearest dollar) (i) Prepare a cash budget.