Waterways Corporation is preparing its budget for the coming year, 2017. The fir

Question

Waterways Corporation is preparing its budget for the coming year, 2017. The first step is to plan for the first quarter of that coming year. Waterways gathered the following information from the managers.

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, 2016, totaled $183,780.

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, 2016, totaled $120,595. Raw Materials on December 31, 2016, totaled 11,295 pounds.

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

The Cash balance on December 31, 2016, totaled $100,500, but management has decided it would like to maintain a cash balance of at least $800,000 beginning on January 31, 2017. 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 Romney’s 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.

Please assume Raw Materials at 12/31/16 is the 11,295 given (not 10,335).

Please use the rounding rules that WileyPlus tells you in the problem.

There is one instance in the problem that WileyPlus does not round properly. Utilities for January in the Manufacturing Overhead budget is 10,165 in WP, instead of 10,166 (as it should be rounded). Please use the 10,165 in your answer.

Same with Maintenance on MOH for January. If you round up (as it should be), it is incorrect. So you should use 5,647 for MOH Variable Maintenance, not the rounded up 5,648.

1) For the first quarter of 2017, prepare a sales budget.

2) For the first quarter of 2017, prepare a production budget.

3) For the first quarter of 2017, 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.)

4) For the first quarter of 2017, prepare a direct labor budget. (Round time per unit to nearest hour, e.g. 30 minutes will be rounded to 0.5 hours)

5) For the first quarter of 2017, 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.)

6)  For the first quarter of 2017, prepare a selling and administrative budget. (Enter per unit expenses rounded to 2 decimal places. E.g. 1.25)

7) For the first quarter of 2017, prepare a schedule for expected cash collections from customers. (Do not leave any answer field blank. Enter 0 for amounts.)

8)For the first quarter of 2017, prepare a schedule for expected payments for materials purchases. (Round answers to 0 decimal places, e.g. 2,520. Do not leave any answer field blank. Enter 0 for amounts.)

9) For the first quarter of 2017, prepare a cash budget. (Round answers to 0 decimal places, e.g. 2,520. Do not leave any answer field blank. Enter 0 for amounts.)

Sales Unit sales for November 2016 112,500 Unit sales for December 2016 102,100 Expected unit sales for January 2017 113,000 Expected unit sales for February 2017 112,500 Expected unit sales for March 2017 116,000 Expected unit sales for April 2017 125,000 Expected unit sales for May 2017 137,500 Unit selling price $12

Explanation / Answer

1)

Sales Budget

2.

Production Budget

3.

Direct material budget

Metal

Plastic

Rubber

4.

Direct Labor Budget

5.

Manufacturing Budget

6.

Selling and Administration Budget

7.

Schedule for expected Cash Collection

8.

Schedule for expected payments for materials

9.

Cash Budget

January February March Total Units to be sold 1,13,000 1,12,500 1,16,000 341500 * Selling price 12 12 12 12 1356000 1350000 1392000 4098000

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