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   112,000 Unit sales for December 2019   102,000 Expected unit sales for January 2020   114,000 Expected unit sales for February 2020   114,000 Expected unit sales for March 2020   116,000 Expected unit sales for April 2020   126,000 Expected unit sales for May 2020   136,000 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 $183,600.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 11,400 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 $103,740. 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   40¢   per labor hour Maintenance   30¢   per labor hour Salaries   $41,000   per month Depreciation   $18,500   per month Property taxes   $2,900   per month Insurance   $1,200   per month Maintenance   $1,400   per month   Selling and Administrative Variable selling and administrative cost per unit is $1.60.    Advertising   $16,000 a month    Insurance   $1,600 a month    Salaries   $73,000 a month    Depreciation   $2,400 a month    Other fixed costs   $3,100 a month Other 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 4,800 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 $520,000 equipment purchase is planned for February. 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   $     $     $     $

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   112,000
Unit sales for December 2019   102,000
Expected unit sales for January 2020   114,000
Expected unit sales for February 2020   114,000
Expected unit sales for March 2020   116,000
Expected unit sales for April 2020   126,000
Expected unit sales for May 2020   136,000
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 $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 11,400 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 $103,740.

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   40¢   per labor hour
Maintenance   30¢   per labor hour
Salaries   $41,000   per month
Depreciation   $18,500   per month
Property taxes   $2,900   per month
Insurance   $1,200   per month
Maintenance   $1,400   per month

 

Selling and Administrative
Variable selling and administrative cost per unit is $1.60.
   Advertising   $16,000 a month
   Insurance   $1,600 a month
   Salaries   $73,000 a month
   Depreciation   $2,400 a month
   Other fixed costs   $3,100 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 4,800 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 $520,000 equipment purchase is planned for February.

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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