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 111,000Unit sales for December 2019 101,000Expected unit sales for January 2020 113,000Expected unit sales for February 2020 113,000Expected unit sales for March 2020 118,000Expected unit sales for April 2020 124,000Expected unit sales for May 2020 137,000Unit selling price $12Waterways 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 MaterialsDirect 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 11,300 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 $102,740.Direct LaborLabor requires 12 minutes per unit for completion and is paid at a rate of $6 per hour. Manufacturing OverheadIndirect materials 30¢ per labor hourIndirect labor 50¢ per labor hourUtilities 50¢ per labor hourMaintenance 30¢ per labor hourSalaries $42,000 per monthDepreciation $17,300 per monthProperty taxes $2,600 per monthInsurance $1,300 per monthMaintenance $1,200 per month Selling and AdministrativeVariable selling and administrative cost per unit is $1.40. Advertising $15,000a month Insurance $1,300a month Salaries $71,000a month Depreciation $2,600a month Other fixed costs $2,700a monthOther InformationThe Cash balance on December 31, 2019, totaled $103,000, 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 $2.30 per share for 4,940 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 6% interest. Waterways borrows on the first day of the month and repays on the last day of the month. A $480,000 equipment purchase is planned for February.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)WATERWAYS CORPORATIONDirect Labor Budget First Quarter January February March Quarter Units to be Produced $ $ $ $ Direct Labor Time (Hours) Per Unit $ $ $ $ Total Required Direct Labor Hours $ $ $ $ Direct Labor Cost Per Hour $ $ $ $ Total Direct Labor Cost $ $ $ $ For the first quarter of 2020, prepare a schedule for expected cash collections from customers.Schedule of Expected Collections from Customers January February March QuarterAccounts receivable, 12/31/19 $ $ $ $January sales February sales March sales Total cash collections $ $ $ $ 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.)Schedule of Expected Cash Payments for Purchases January February March QuarterAccounts payable, 12/31/19 $ $ $ $January February March Total payments $ $ $ $

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EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter4: Financial Planning And Forecasting

Section: Chapter Questions

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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		113,000
Expected unit sales for February 2020		113,000
Expected unit sales for March 2020		118,000
Expected unit sales for April 2020		124,000
Expected unit sales for May 2020		137,000
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 11,300 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 $102,740.

Direct Labor

Labor requires 12 minutes per unit for completion and is paid at a rate of $6 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	$42,000	per month
Depreciation	$17,300	per month
Property taxes	$2,600	per month
Insurance	$1,300	per month
Maintenance	$1,200	per month

Selling and Administrative
Variable selling and administrative cost per unit is $1.40.
Advertising	$15,000	a month
Insurance	$1,300	a month
Salaries	$71,000	a month
Depreciation	$2,600	a month
Other fixed costs	$2,700	a month

Other Information

The Cash balance on December 31, 2019, totaled $103,000, 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 $2.30 per share for 4,940 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 6% interest. Waterways borrows on the first day of the month and repays on the last day of the month. A $480,000 equipment purchase is planned for February.

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)

WATERWAYS CORPORATION Direct Labor Budget
	First Quarter
	January	February	March	Quarter
Units to be Produced	$	$	$	$
Direct Labor Time (Hours) Per Unit	$	$	$	$
Total Required Direct Labor Hours	$	$	$	$
Direct Labor Cost Per Hour	$	$	$	$
Total Direct Labor Cost	$	$	$	$

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

Schedule of Expected Collections from Customers
	January	February	March	Quarter
Accounts receivable, 12/31/19	$	$	$	$
January sales
February sales
March sales
Total cash collections	$	$	$	$

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.)

Schedule of Expected Cash Payments for Purchases
	January	February	March	Quarter
Accounts payable, 12/31/19	$	$	$	$
January
February
March
Total payments	$	$	$	$

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