Corporation is preparing its budget for the coming year. The first step is to pl
ID: 2402342 • Letter: C
Question
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 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 totaled 183,780.
Direct Materials:
The product uses metal, plastic, and rubber. In total, each unit requires 2 pounds of material at an average cost of 0.75 per pound.
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 totaled $120,595. Raw materials on December 31 totaled 11,295 pounds.
Direct Labor:
Labor requires 12 minutes per unit for completion and is paid at a rate of $18 per hour.
Manufacturing Overhead:
Indirect materials
30 cents per labor hour
Indirect labor
50 cents per labor hour
Utilities
45 cents per labor hour
Maintenance
25 cents per labor hour
Salaries
$52,000 per month
Depreciation
$16,800 per month
Property taxes
$2,675 per month
Insurance
$2,200 per month
Janitorial
$1,800 per month
Selling and Administrative Expenses:
Variable selling and administrative cost per unit is $2.40.
Advertising
$15,000 per month
Insurance
$1,400 per month
Salaries
$72,000 per month
Depreciation
$2,500 per month
Other fixed costs
$3,000 per month
Other Information:
The cash balance on December 31 totaled $220,500, but management has decided that it wants to maintain a cash balance of at least $750,000 beginning January 31. 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 the First National 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. Reserve repayment, if required, until Waterways can pay the entire amount. A $250,000 equipment purchase is planned for February.
Instructions (Do all parts):
Note: All budgets and schedules should be prepared by month for the first quarter (January, February, and March). Round all figures to the nearest dollar. For labor hours round to whole hours.
e. Prepare a manufacturing overhead budget.
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.
i. Prepare a cash budget.
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
Explanation / Answer
Please hit LIKE button if this helped. For any further explanation, please put your query in comment, will get back to you. Working-1 Sales Budget Nov Dec Jan Feb Mar Total Apr May Estimated Unit Sale 113500 103100 114000 113500 116000 343500 126000 138500 Selling Price Per Unit 12 12 12 12 12 12 12 12 Total Estimated Sale 1362000 1237200 1368000 1362000 1392000 0 4122000 1512000 1662000 1. Production Budget Dec Jan Feb Mar Total Apr Expected units to be sold 103100 114000 113500 116000 343500 126000 138500 add: desired ending inventory 11400 11350 11600 12600 12600 13850 Total Units available for sale 114500 125350 125100 128600 356100 139850 Less: Beginning invenory 11400 11350 11600 11400 12600 Production Needed 113950 113750 117000 0 344700 127250 2. Direct Material Purchase Budget Jan Feb Mar Quarter Apr Material Needed for production: 2 for one unit Prod*2 227900 227500 234000 689400 254500 add: desired ending inventory 11375 11700 12725 12725 Total Units available for usage 239275 239200 246725 702125 Less: Beginning invenory 11295 11375 11700 11295 Total Purchases to be made 227980 227825 235025 690830 Per Unit Purchase Price 0.75 0.75 0.75 0.75 Total Purchases in $ 170985 170869 176269 518123 h. Schedule of Expected Cash Payments Jan Feb Mar Quarter Payable Accounts Payable-Last Year 120595 120595 Jan 85493 85493 170985 Feb 85434 85434 170869 Mar 88134 88134 88134 206088 170927 173569 0 550583 88134 3. Direct Labor Budget Jan Feb Mar Oct Quarter Labor Hour Requried: Budgeted Production 113950 113750 117000 344700 Hours needed 12/60 0.2 0.2 0.2 Total Hour Required 22790 22750 23400 68940 Per Hour Cost 18 18 18 Total Labor Cost 0 410220 409500 421200 1240920 g. Schedule of Expected Cash Collection Jan Feb Mar Quarter Receivable Accounts Receivable-Last Year 183780 183780 Jan 1162800 205200 1368000 Feb 1157700 204300 1362000 Mar 1183200 1183200 208800 1346580 1362900 1387500 0 4096980 208800 e. Manufacturing Overhead Budget Jan Feb Mar Quarter Indirect Material 0.3*Labor Hour 6837 6825 7020 20682 Indirect Labor 0.5*Labor Hour 11395 11375 11700 34470 Utilities 0.45*Labor Hour 10256 10238 10530 31023 Maintenance 0.25*Labor Hour 5698 5688 5850 17235 Salaries 52000 52000 52000 156000 Depreciation 16800 16800 16800 50400 Property Tax 2675 2675 2675 8025 Insurance 2200 2200 2200 6600 Janitorial 1800 1800 1800 5400 Total Manufacturing Overhead 109660 109600 110575 329835 f. Selling and Admin Budget Jan Feb Mar Quarter Variable Selling and Admin 2.4*Sale Unit 273600 272400 278400 824400 Advertising 15000 15000 15000 45000 Insurance 1400 1400 1400 4200 Salaries 72000 72000 72000 216000 Depreciation 2500 2500 2500 7500 Other fixed costs 3000 3000 3000 9000 Total Selling and Admin 367500 366300 372300 1106100 Less: Non Cash 2500 2500 2500 7500 Cash Paid for Selling and Admin 365000 363800 369800 1098600 i. Cash Budget Jan Feb Mar Quarter Beginning Balance 220500 750686 750332 220500 add: Cash Collection 1346580 1362900 1387500 4096980 Total Available Cash 1567080 2113586 2137832 4317480 Cash Disbursment for: Material 206088 170927 173569 550583 Labor 410220 409500 421200 1240920 Manufacturing overhead 109660 109600 110575 329835 Selling and Admin 365000 363800 369800 1098600 0 Dividends 12500 12500 12500 37500 Equipment purchases 250000 250000 Total Cash Disbursment 1103468 1316327 1087644 3507438 Cash Surplus/(Deficit) 463613 797259 1050189 810042 Borrowing 289000 289000 Interest 8%*Borrowing*Months/12 1927 1927 1627 5480 Repayment 45000 244000 289000 Ending Cash Balance 750686 750332 804562 804562