​​​ Celtic Wood Products Limited ("Celtic") manufactures wooden shelves and mirrors. Sales quantities are estimated based on results from previous years. Estimated Sales of Shelves in Units for 2015 January 7,800 July 6,200 January/16 7,900 February 7,700 August 6,200 February/16 7,900 March 6,200 September 7,500 April 6,200 October 7.500 May 6,200 November 8,000 June 6,200 December 8,500 Estimated Sales of Mirrors in Units for 2015 January 4,900 July 5,000 January/16 4,400 February 5,200 August 5,000 February/16 4,900 March 6,400 September 6,500 April 5,200 October 6,700 May 5,200 November 6,800 June 5,000 December 6,900 Estimated Custom Milling in $$$ for 2015 Month Cash Received Month Work Started & Completed December/14 $12,000 February April/ 15 $20,000 May July/15 $25,000 September December/15 $30,000 January/16 Celtic wholesales the Shelves at $30 each and the mirrors at $38 each. All sales are on credit with terms of 2/eom, n30. Historically, 40% of the accounts receivable is paid within the discount period by month end. 40% are paid in the month following sale and the remainder are paid in the second month following sale. Bad debts of 1.5% are usually encountered. In addition, they do Custom Milling. For all custom milling jobs, they insist that the total amount of the job be received in full before starting the job. The customer has to supply all the raw materials, so the only prime cost that Celtic incurs on these jobs is Direct Labour. The mark up on these jobs is 100% of direct labour cost (before any benefits are factored in). No sales discounts apply to these jobs and there are no bad debts applicable as the customer has paid in full before work is commenced. The "actual" balance sheet as at December 31, 2014 is attached. (Do not recalculate any of the numbers in the opening balance sheet. Take them as "Given".) Each shelf requires 4.0 board feet of wood, which costs $3 per board foot and $0.50 of indirect materials. The mirrors require 4.0 board feet of wood, which costs $3 per board foot and 1 mirror which costs $5 each as well as indirect materials of $1 per mirror. Commencing January, 2011, management wishes the ending balance in direct materials inventory to equal 20% of the following month's production requirements. (Ignore indirect materials when calculating direct materials inventory.) Management also expects finished goods inventory to equal 40% of the following month's sales. Purchases of direct materials are all made on credit and 40% are paid in the month of purchase with the remaining balance paid in the month following purchase. Each shelf requires 48 minutes of direct labour and the mirror also requires 48 minutes. Average wage rates are $11 per hour plus 22% for employee benefits. The wages are all paid in the month incurred, however, the benefits are paid the month following. As the company is dedicated to quality, it offers a 3 month full warranty. Based on past results, the company expects that it will have warranty expenses equal to 1% of sales on its products. Past experience dictates that it reimburses their customers for the warranty claims by reimbursing the customers the money paid to them. The payment pattern is as follows: 1st month after sale 30% 2nd month after sale 20% 3rd month after sale 50%. Assume all of the opening balance in warranty payable is paid out equally in the first three months of 2015. The company expects to incur the following factory overhead: Indirect materials as outlined above Utilities $4,000 per month Indirect labour (See Note Below) $8,000 per month Benefits on indirect labour 22% of indirect labour Rent $15,000 per month Equipment depreciation (See Note Below) $2,500 per month Repairs& maintenance $1,250 per month Factory insurance $1,000 per month. Note re Indirect Labour: Normal indirect labour is $8,000 per month. However, if the total number of direct labour hours equals or exceeds 10,600 hours, the company will hire an additional part-time supervisor at a cost of $3,000 per month. The number of direct labour hours must also include the DL hours incurred in doing the milling work. Note re Equipment Depreciation: On April 1, 2015, the company plans to purchase and pay for a $100,000 piece of manufacturing equipment. The $2,500 per month depreciation expense represents depreciation on all equipment except the above noted acquisition. For the new equipment, it is expected to have an estimated useful life of 5 years and a salvage value of $10,000. The company uses straight-line depreciation.