has recently acquired a small manufacturing operation in that produces one of its more popular items.

has recently acquired a small manufacturing operation in that produces one of its more popular items. This plant will provide these units for resale in retail hardware stores in British Columbia and Alberta. Because the budget prepared by the plant was incomplete, Jordan Leigh, Waterways' CFO, was sent to B.C. to oversee the plant's budgeting process for the second quarter of 2017.

Jordan asked the various managers to collect the following information for preparing the second-quarter budget.

Sales

Unit sales for February 2017

99,000Unit sales for March 2017

111,000Expected unit sales for April 2017

119,000Expected unit sales for May 2017

124,000Expected unit sales for June 2017

129,000Expected unit sales for July 2017

144,000Expected unit sales for August 2017

169,000Average unit selling price

$12

Based on the experience from the home plant, Jordan has suggested that the B.C. plant keep 10% of the next month's unit sales in ending inventory. The plant has contracts with some of the major home hardware giants, so all sales are on account; 50% of the accounts receivable is collected in the month of sale, and the balance is collected in the month after sale. This was the same collection pattern from the previous year. The new plant has no bad debts.

Direct Materials

The combined quantity of direct materials (consisting of metal, plastic and rubber) used in each unit is 1.10 kg. Metal, plastic, and rubber together amount to $1.50 per kg. Inventory of combined direct material on March 31 consisted of 13,145 kg.

This plant likes to keep 10% of the materials needed for the next month in its ending inventory. Fifty percent of the payables is paid in the month of purchase, and 50% is paid in the month after purchase.

Accounts Payable on March 31 will total $124,800.

Direct Labour

Labour requires 15 minutes per unit for completion and is paid at an average rate of $12 per hour.

Manufacturing OverheadIndirect materials

$0.50

per labour hourIndirect labour

$0.50

per labour hourUtilities

$0.60

per labour hourMaintenance

$0.30

per labour hourSalaries

$44,800

per monthDepreciation

$14,400

per monthProperty taxes

$2,200

per monthInsurance

$1,050

per monthJanitorial

$2,400

per month

Selling and AdministrativeVariable selling and administrative cost per unit is $1.40.   Advertising

$12,000a month   Depreciation

$2,600a month   Insurance

$1,200a month   Other fixed costs

$3,500a month   Salaries

$60,000a month

Other Information

The Cash balance on March 31 will be $115,000, but Waterways has decided it would like to maintain a cash balance of at least $500,000 beginning on April 30. The company has an open line of credit with its bank. The terms of the agreement require borrowing to be in $1,000 increments at 2% interest. Borrowing is considered to be on the first day of the month and repayments are on the last day of the month. Assume interest is paid at the end of the quarter.