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Waterways Continuing Problem 09 Waterways Corporation is preparing its budget for the coming year, 2020. The...

Waterways Continuing Problem 09

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

112,000

Expected unit sales for March 2020

116,000

Expected unit sales for April 2020

125,000

Expected unit sales for May 2020

138,000

Unit selling price

$12


Waterways likes to keep 10% of the next month’s 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, totaled $181,800.

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, 2019, totaled 11,200 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, 2019, totaled $102,595.

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

30¢

per labor hour

Salaries

$43,000

per month

Depreciation

$17,700

per month

Property taxes

$2,900

per month

Insurance

$1,200

per month

Maintenance

$1,300

per month

Selling and Administrative

Variable selling and administrative cost per unit is $1.50.

   Advertising

$16,000

a month

   Insurance

$1,500

a month

   Salaries

$73,000

a month

   Depreciation

$2,300

a month

   Other fixed costs

$2,800

a month


Other Information

The Cash balance on December 31, 2019, totaled $99,000, but management has decided it would like to maintain a cash balance of at least $700,000 beginning on January 31, 2020. Dividends are paid each month at the rate of $2.30 per share for 4,860 shares outstanding. The company has an open line of credit with Romney’s 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 $510,000 equipment purchase is planned for February.

For the first quarter of 2020, prepare a sales budget.

For the first quarter of 2020, prepare a production budget.

For the first quarter of 2020, prepare a direct materials budget. (Round cost per pound to 2 decimal places, e.g. 0.25 and all other answers to 0 decimal places, e.g. 2,520.)

For the first quarter of 2020, prepare a direct labor budget. (Round time per unit to nearest hour, e.g. 30 minutes will be rounded to 0.5 hours)

For the first quarter of 2020, prepare a manufacturing overhead budget. (Round overhead rate to 2 decimal places, e.g. 5.25 and all other answers to 0 decimal places, e.g. 2,520. List Variable Costs first.)

For the first quarter of 2020, prepare a selling and administrative budget. (Enter per unit expenses rounded to 2 decimal places. E.g. 1.25)

For the first quarter of 2020, prepare a schedule for expected cash collections from customers.

For the first quarter of 2020, prepare a schedule for expected payments for materials purchases. (Round answers to 0 decimal places, e.g. 2,520.)

For the first quarter of 2020, prepare a cash budget. (Round answers to 0 decimal places, e.g. 2,520.)

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