Question

In: Accounting

Sprinkler Corporation produces plastic garden sprinklers. The company is preparing its budget for 2015. The first...

Sprinkler Corporation produces plastic garden sprinklers. The company is preparing its budget for 2015. The first step is to plan for the first quarter of that coming year. Sprinkler has collected the following information from the managers.

  1. Sales:

Sales for November 2014                                     112,500 units

Sales for December 2014                                     102,100 units

Expected sales for January 2015                       113,000 units

Expected sales for February 2015                     112,500 units

Expected sales for March 2015                          116,000 units

Expected sales for April 2015                             125,000 units

Expected sales for May 2015                              137,500 units

Selling price per unit                                              $12

Sprinkler likes to keep 10% of next month’s unit sales in ending inventory. All sales are on credit. 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, 2014, totaled $183,780.

  1. Direct Materials:

2 pounds of direct materials is needed to produce one unit. Sprinkler likes to keep 5% of the materials needed for the next month’s production in its ending inventory. Raw materials on hand on December 31, 2014, totaled 11,295 pounds.

Payment for materials is made within 15 days. 50% is paid in the month of purchase, and 50% is paid after the month of purchase. Accounts payable on December 31, 2014, totaled $120,595.

  1. Direct Labor

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

  1. Manufacturing Overhead

Indirect materials                                     $0.30 per labor hour

Indirect labor                                            $0.50 per labor hour

Utilities                                                        $0.45 per labor hour

Maintenance                                            $0.25 per labor hour

Factory supervisor’s salary                  $42,000 per month

Factory Depreciation                             $16,800 per month

Property taxes                                           $ 2,675 per month

Insurance                                                    $ 1,200 per month

Repairs                                                         $ 1,300 per month

  1. Selling and Administrative expenses

Salaries                                                        $72,000 per month

Advertising                                                 $15,000 per month

Insurance                                                    $ 1,400 per month

Office Depreciation                                $ 2,500 per month

Other fixed costs                                      $ 3,000 per month

Other Information

The cash balance on December 31, 2014, totaled $100,500, but management has decided it would like to maintain a cash balance of at least $800,000 beginning on January 31, 2015.

Dividends are paid each month @ $2.50 per share for 5,000 shares. The company has an open line of credit with national Bank. The terms of the agreement require borrowing to be in the increments of $1,000, and the interest rate is 8%. Sprinkler borrows on the first day of the month and repays on the last day of the month if possible.

A $500,000 equipment purchase is planned for February 2015.

Required:

Do the following for the first quarter (January, February & March) of 2015 by using EXCEL spreadsheet:

  1. Prepare a Direct Materials Purchase Budget

Solutions

Expert Solution


Related Solutions

Sprinkler Corporation produces plastic garden sprinklers. The company is preparing its budget for 2015. The first...
Sprinkler Corporation produces plastic garden sprinklers. The company is preparing its budget for 2015. The first step is to plan for the first quarter of that coming year. Sprinkler has collected the following information from the managers. Sales: Sales for November 2014                              112,500 units Sales for December 2014                               102,100 units Expected sales for January 2015                   113,000 units Expected sales for February 2015                 112,500 units Expected sales for March 2015                     116,000 units Expected sales for April 2015                        125,000 units Expected sales for May 2015                         137,500 units Selling price...
Corporation is preparing its budget for the coming year. The first step is to plan for...
Corporation is preparing its budget for the coming year. The first step is to plan for the first quarter of that coming year. Waterways gathered the following information from the managers. Sales: Actual unit sates for November 113,500 Actual unit sales for December 103,100 Expected unit sales for January 114,000 Expected unit sales for February 113,500 Expected unit sales for March 116,000 Expected unit sales for April 126,000 Expected unit sales for May 138,500 Unit selling price $12 Waterways wants...
Waterways Corporation is preparing its budget for the coming year, 2020. The first step is to...
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 111,000 Unit sales for December 2019 101,000 Expected unit sales for January 2020 112,000 Expected unit sales for February 2020 114,000 Expected unit sales for March 2020 115,000 Expected unit sales for April 2020 124,000...
Waterways Corporation is preparing its budget for the coming year, 2020. The first step is to...
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 114,000 Unit sales for December 2019 103,000 Expected unit sales for January 2020 114,000 Expected unit sales for February 2020 111,000 Expected unit sales for March 2020 116,000 Expected unit sales for April 2020 125,000...
Waterways Corporation is preparing its budget for the coming year. The first step is to plan...
Waterways Corporation is preparing its budget for the coming year. The first step is to plan for the first quarter of that coming year. Waterways gathered the following information from the managers. Sales: Actual unit sates for November 113,500 Actual unit sales for December 103,100 Expected unit sales for January 114,000 Expected unit sales for February 113,500 Expected unit sales for March 116,000 Expected unit sales for April 126,000 Expected unit sales for May 138,500 Unit selling price $12 Waterways...
Waterways (9) Corporation is preparing its budget for the coming year. The first step is to...
Waterways (9) Corporation is preparing its budget for the coming year. The first step is to plan for the first quarter of that coming year. Waterways gathered the following information from the managers. Sales: Actual unit sates for November 113,500 Actual unit sales for December 103,100 Expected unit sales for January 114,000 Expected unit sales for February 113,500 Expected unit sales for March 116,000 Expected unit sales for April 126,000 Expected unit sales for May 138,500 Unit selling price $12...
Waterways Corporation is preparing its budget for the coming year, 2020. The first step is to...
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 111,000 Unit sales for December 2019 103,000 Expected unit sales for January 2020 114,000 Expected unit sales for February 2020 114,000 Expected unit sales for March 2020 116,000 Expected unit sales for April 2020 127,000...
Waterways Corporation is preparing its budget for the coming year, 2020. The first step is to...
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 101,000 Expected unit sales for January 2020 114,000 Expected unit sales for February 2020 111,000 Expected unit sales for March 2020 117,000 Expected unit sales for April 2020 124,000...
Waterways Corporation is preparing its budget for the coming year, 2020. The first step is to...
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 112,000 Unit sales for December 2019 101,000 Expected unit sales for January 2020 114,000 Expected unit sales for February 2020 112,000 Expected unit sales for March 2020 115,000 Expected unit sales for April 2020 127,000...
Waterways Corporation is preparing its budget for the coming year, 2020. The first step is to...
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 111,000 Unit sales for December 2019 103,000 Expected unit sales for January 2020 114,000 Expected unit sales for February 2020 112,000 Expected unit sales for March 2020 116,000 Expected unit sales for April 2020 124,000...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT