Variable Cost and Waterways Continuing Problem

Topics: Variable cost, Balance sheet, Cash flow Pages: 17 (5675 words) Published: September 17, 2012
Waterways Continuing Problem


Waterways Continuing Problem
WCP1 Waterways Corporation is a private corporation formed for the purpose of providing the products and the services needed to irrigate farms, parks, commercial projects, and private homes. It has a centrally located factory in a U.S. city that manufactures the products it markets to retail outlets across the nation. It also maintains a division that provides installation and warranty servicing in six metropolitan areas. The mission of Waterways is to manufacture quality parts that can be used for effective irrigation projects that also conserve water. By that effort, the company hopes to satisfy its customers, provide rapid and responsible service, and serve the community and the employees who represent them in each community. The company has been growing rapidly, so management is considering new ideas to help the company continue its growth and maintain the high quality of its products. Waterways was founded by Will Winkman who is the company president and chief executive officer (CEO). Working with him from the company’s inception was Will’s brother, Ben, whose sprinkler designs and ideas about the installation of proper systems have been a major basis of the company’s success. Ben is the vice president who oversees all aspects of design and production in the company. The factory itself is managed by Todd Senter who hires his line managers to supervise the factory employees. The factory makes all of the parts for the irrigation systems. The purchasing department is managed by Hector Hines. The installation and training division is overseen by vice president Henry Writer, who supervises the managers of the six local installation operations. Each of these local managers hires his or her own local service people. These service employees are trained by the home office under Henry Writer’s direction because of the uniqueness of the company’s products. There is a small Human Resources department under the direction of Sally Fenton, a vice president who handles the employee paperwork, though hiring is actually performed by the separate departments. Sam Totter is the vice president who heads the sales and marketing area; he oversees 10 well-trained salespeople. The accounting and finance division of the company is headed by Abe Headman, who is the chief financial officer (CFO) and a company vice president; he is a member of the Institute of Management Accountants and holds a certificate in management accounting. He has a small staff of Certified Public Accountants, including a controller and a treasurer, and a staff of accounting input operators who maintain the financial records. A partial list of Waterways’ accounts and their balances for the month of November 2012 follows. Accounts Receivable Advertising Expenses Cash Depreciation—Factory Equipment Depreciation—Office Equipment Direct Labor Factory Supplies Used Factory Utilities Finished Goods Inventory, November 30 Finished Goods Inventory, October 31 Indirect Labor Office Supplies Expense Other Administrative Expenses Prepaid Expenses Raw Materials Inventory, November 30 Raw Materials Inventory, October 31 Raw Materials Purchases Rent—Factory Equipment Repairs—Factory Equipment Salaries Sales Sales Commissions Work In Process Inventory October 31 Work In Process Inventory, November 30 $ 275,000 54,000 260,000 16,800 2,400 42,000 16,800 10,200 68,800 72,550 48,000 1,600 72,000 41,250 52,700 38,000 184,500 47,000 4,500 325,000 1,350,000 40,500 52,700 42,000


Waterways Continuing Problem

Instructions (a) Based on the information given, construct an organizational chart of Waterways Corporation. (b) A list of accounts and their values are given above. From this information, prepare a cost of goods manufactured schedule, an income statement, and the current assets section of the balance sheet for Waterways Corporation for the month of November 2012.

Waterways Continuing Problem


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