Waterways Corporation is preparing its budget for the coming year, 2022. The first step is to plan for the first quarter

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Waterways Corporation is preparing its budget for the coming
year, 2022. 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 2021 111,000 Unit sales for December 2021 101,000 Expected
unit sales for January 2022 112,000 Expected unit sales for
February 2022 114,000 Expected unit sales for March 2022 115,000
Expected unit sales for April 2022 124,000 Expected unit sales for
May 2022 138,000 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, 2021,
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, 2021 totaled 11,220 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,
2021, totaled $120,595. Direct Labor Labor requires 12 minutes per
unit for completion and is paid at a rate of $9 per hour.
Manufacturing Overhead Indirect materials 30¢ per labor hour
Indirect labor 50¢ per labor hour Utilities 50¢ per labor hour
Maintenance 20¢ per labor hour Salaries $41,000 per month
Depreciation $17,400 per month Property taxes $2,900 per month
Insurance $1,300 per month Maintenance $1,300 per month Selling and
Administrative Variable selling and administrative cost per unit is
$1.60. Advertising $14,000 a month Insurance $1,300 a month
Salaries $72,000 a month Depreciation $2,400 a month Other fixed
costs $2,800 a month Other Information The Cash balance on December
31, 2021, totaled $100,000, but management has decided it would
like to maintain a cash balance of at least $700,000 beginning on
January 31, 2022. Dividends are paid each month at the rate of
$2.50 per share for 4,720 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 9% interest.
Waterways borrows on the first day of the month and repays on the
last day of the month. A $540,000 equipment purchase is planned for
February.
1. For the first quarter of 2022, Prepare a manufacturing
overhead budget.
2. For the first quarter of 2022, Prepare a selling and
administrative budget.
3. for the first quarter of 2022, prepare a schedule for
expected cash collections from customers.
4. For the first quarter of 2022, prepare a schedule for
expected payments for material purchases.
5. for the first quarter of 2022, prepare a cash budget.