Question

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 102,000 Expected unit sales for January 2020 114,000 Expected unit sales for February 2020 113,000 Expected unit sales for March 2020 117,000 Expected unit sales for April 2020 126,000 138,000 Expected unit sales for May 2020 $12 Unit selling price 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 $183,600. 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 11,390 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 $103,735. Direct Labor Labor requires 12 minutes per unit for completion and is paid at a rate of $9 per hour Manufacturing Overhead Indirect materials per labor hour 30t

Answer 1

1		Sales Budget
		Jan	Feb	March	Quarter
	Unit Sales	114,000	113,000	117,000	344,000
	Selling Price	12	12	12	12
	Total Sales Revenue	1,368,000	1,356,000	1,404,000	4,128,000

2		Production Budget
		Jan	Feb	March	Quarter	April
	Unit Sales	114,000	113,000	117,000	344,000	126,000
	Plus: Desired ending inventory	11,300	11,700	12,600	12,600	13,800
	Less: Beginning Inventory	11,400	11,300	11,700	11,400	12,600
	Units to produce	113,900	113,400	117,900	345,200	127,200
3		Direct Materials Budget
		Jan	Feb	March	Quarter	April
	Units to be produced	113,900	113,400	117,900	345,200	127,200
	Multiply by: Quantity of DM needed per unit	2	2	2	2	2
	Total Quantity of DM needed	227,800	226,800	235,800	690,400	254,400
	Plus: Desired Ending inventory of DM	11,340	11,790	12,720	12,720
	Less: Beginning inventory of DM	11,390	11,340	11,790	11,390
	Total Quantity of DM to purchase	227,750	227,250	236,730	691,730
	Multiply by: Cost per unit	0.80	0.80	0.80	0.80
	Total cost of DM Purchases	182,200	181,800	189,384	553,384

4		Direct Labour Budget
		Jan	Feb	March	Quarter
	Units to be produced	113,900	113,400	117,900	345,200
	Multiply by: DL hours per unit	0.20	0.20	0.20	0.20
	Total DL hours	22,780	22,680	23,580	69,040
	Multiply by: DL Rate	9.00	9.00	9.00	9.00
	Total Direct Labour budget	205,020	204,120	212,220	621,360
5		Manufacturing Overhead Budget
		Jan	Feb	March	Quarter
	Variable Costs				-
	Indirect Material	6,834	6,804	7,074	20,712
	Indirect Labour	11,390	11,340	11,790	34,520
	Utilities	11,390	11,340	11,790	34,520
	Maintenance	6,834	6,804	7,074	20,712
	Total Variable Cost	36,448	36,288	37,728	110,464
	Fixed Costs
	Salaries	41,000	41,000	41,000	123,000
	Depreciation	18,300	18,300	18,300	54,900
	Property Taxes	2,400	2,400	2,400	7,200
	Maintenance	1,300	1,300	1,300	3,900
	Insurance	1,400	1,400	1,400	4,200
	Total Fixed Cost	64,400	64,400	64,400	193,200
	Total Manufacturing OH	100,848	100,688	102,128	303,664
	Direct Labour Hours	22,780	22,680	23,580	69,040
6		Selling and Admin Expense Budget
		Jan	Feb	March	Quarter
	Budgeted Sales in units	114,000	113,000	117,000	344,000
	Variable Expenses per unit	1.50	1.50	1.50	1.50
	Total Variable S&A Expenses	171,000	169,500	175,500	516,000
	Fixed Expenses
	Advertising	14,000	14,000	14,000	42,000
	Insurance	1,600	1,600	1,600	4,800
	Salaries	71,000	71,000	71,000	213,000
	Depreciation	2,600	2,600	2,600	7,800
	Other	3,200	3,200	3,200	9,600
	Total Fixed Expenses	92,400	92,400	92,400	277,200
	Total S&A Expenses	263,400	261,900	267,900	793,200
6		Expected collection from debtors
		Jan	Feb	March	Quarter
	Accounts Receivable as on 31.12.2019	27,540			27,540
	January Sales	1,162,800	205,200		1,368,000
	Feb Sales		1,152,600	203,400	1,356,000
	March Sales			1,193,400	1,193,400
	Total Cash collections	1,190,340	1,357,800	1,396,800	3,944,940
7		Expected Cash payment for purchases
		Jan	Feb	March	Quarter
	Accounts Payable as on 31.12.2019	51,868			51,868
	January	91,100	91,100		182,200
	Feb		90,900	90,900	181,800
	March			94,692	94,692
	Total	142,968	182,000	185,592	510,560

Note: Format of Cash budget is not clear in the question