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# A partial list of Waterways’ accounts and their balances for the month of November follows. Accounts Receivable \$ 295,000 Advertising Expenses 54,000 Cash 260,000 Depreciation—Factory Equipment 16,800 Depreciation—Office Equipment 2,500 Direct Labor 22,000 Factory Supplies Used 16,850 Factory Utilities 10,200 Finished Goods Inventory, November 30 68,300 Finished Goods Inventory, October 31 72,550 Indirect Labor 48,000 Office Supplies Expense 1,400 Other Administrative Expenses 72,000 Prepaid Expenses 41,250 Raw Materials Inventory, November 30 52,700 Raw Materials Inventory, October 31 38,000 Raw Materials Purchases 185,400 Rent—Factory Equipment 47,000 Repairs—Factory Equipment 4,200 Salaries 325,000 Sales 1,350,000 Sales Commissions 40,500 Work In Process Inventory October 31 52,900 Work In Process Inventory, November 30 42,000 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. WATERWAYS CONTINUING PROBLEM: WCP18 (This is a continuation of the Waterways Problem from Chapters 14 through 17.) Vice President for Sales and Marketing Sam Totter is trying to plan for the coming year in terms of production needs to meet the sales demand. He is also trying to determine ways in which the company’s profits might be increased in the coming year. Instructions (a) Waterways markets a simple water control and timer that it mass-produces. During the year, the company sold 696,000 units at an average selling price of \$4.22 per unit. The variable expenses were \$2,053,200, and the fixed expenses were \$683,338. (1) What is the product’s contribution margin ratio? (2) What is the company’s break-even point in units and in dollars for this product? (3) What is the margin of safety, both in dollars and as a ratio? (4) If management wanted to increase its income from this product by 10%, how many additional units would have to be sold to reach this income level? (5) If sales increase by 71,090 units and the cost behaviors do not change, how much will income increase on this product? (b) Waterways is thinking of mass-producing one of its special-order sprinklers. To do so would increase variable costs for all sprinklers by an average of \$0.71 per unit. The company also estimates that this change could increase the overall number of sprinklers sold by 10%, and the average sales price would increase \$0.25 per unit. Waterways currently sells 491,740 sprinkler units at an average selling price of \$26.50. The manufacturing costs are \$6,863,512 variable and \$2,050,140 fixed. Selling and administrative costs are \$2,661,352 variable and \$794,950 fixed. (1) If Waterways begins mass-producing its special-order sprinklers, how would this affect the company? (2) If the average sales price per sprinkler unit did not increase when the company began mass-producing the special-order sprinkler, what would be the effect on the company?

A partial list of Waterways’ accounts and their balances for the month of November follows.

Accounts Receivable \$ 295,000
Advertising Expenses 54,000
Cash 260,000
Depreciation—Factory Equipment 16,800
Depreciation—Office Equipment 2,500
Direct Labor 22,000
Factory Supplies Used 16,850
Factory Utilities 10,200
Finished Goods Inventory, November 30 68,300
Finished Goods Inventory, October 31 72,550
Indirect Labor 48,000
Office Supplies Expense 1,400
Other Administrative Expenses 72,000
Prepaid Expenses 41,250
Raw Materials Inventory, November 30 52,700
Raw Materials Inventory, October 31 38,000
Raw Materials Purchases 185,400
Rent—Factory Equipment 47,000
Repairs—Factory Equipment 4,200
Salaries 325,000
Sales 1,350,000
Sales Commissions 40,500
Work In Process Inventory October 31 52,900
Work In Process Inventory, November 30 42,000

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.

WATERWAYS CONTINUING PROBLEM: WCP18

(This is a continuation of the Waterways Problem from Chapters 14 through 17.)

Vice President for Sales and Marketing Sam Totter is trying to plan for the coming year in terms of production needs to meet the sales demand. He is also trying to determine ways in which the company’s profits might be increased in the coming year.

Instructions
(a) Waterways markets a simple water control and timer that it mass-produces. During the year, the company sold 696,000 units at an average selling price of \$4.22 per unit. The variable expenses were \$2,053,200, and the fixed expenses were \$683,338.
(1) What is the product’s contribution margin ratio?
(2) What is the company’s break-even point in units and in dollars for this product?
(3) What is the margin of safety, both in dollars and as a ratio?
(4) If management wanted to increase its income from this product by 10%, how many additional units would have to be sold to reach this income level?
(5) If sales increase by 71,090 units and the cost behaviors do not change, how much will income increase on this product?
(b) Waterways is thinking of mass-producing one of its special-order sprinklers. To do so would increase variable costs for all sprinklers by an average of \$0.71 per unit. The company also estimates that this change could increase the overall number of sprinklers sold by 10%, and the average sales price would increase \$0.25 per unit. Waterways currently sells 491,740 sprinkler units at an average selling price of \$26.50. The manufacturing costs are \$6,863,512 variable and \$2,050,140 fixed. Selling and administrative costs are \$2,661,352 variable and \$794,950 fixed.
(1) If Waterways begins mass-producing its special-order sprinklers, how would this affect the company?
(2) If the average sales price per sprinkler unit did not increase when the company began mass-producing the special-order sprinkler, what would be the effect on the company?

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