1. Prepare Gessing's operating budget and cash budget for 2019 by quarter. Required schedules and budgets include: sales budget, production budget, direct materials budget, direct labor budget, manufacturing overhead budget, cost of goods sold budget, selling and administrative expense budget, schedule of cash receipts, schedule of cash payments, and cash budget. Manufacturing overhead costs are allocated based on direct labor hours. Round all calculations to the nearest dollar. 2. Prepare Gessing's annual financial budget for 2019 including budgeted income statement and budgeted balance sheet. Gessing Tire Company Balance sheet December 31,2018 Current Assets Cash $ Accounts Receivable Raw Materials Inventory Finished Goods Inventory 52,000 35,000 1,900 2,400 S 91,300 Total Current Assets Property, Plant, and Equipment: Equipment Less: Accumulated Depreciation 142,000 (50,000) 92.000 Total Assets S 183,300 a. Budgeted sales are 1,000 tires for the first quarter and expected to increase by 100 tires per quarter. Cash sales are expected to be 20% of total sales, with the remaining 80% of sales on account. b. Finished Goods Inventory on December 31, 2018 consists of 100 tires at $24 each. c. Desired ending Finished Goods Inventory is 50% of the next quarter's sales; first quarter sales for 2020 are expected be 1,400 tires. FIFO inventory costing method is used. d. Raw Materials Inventory on December 31, 2018, consists of 200 pounds of rubber compound used to manufacture the tires. e. Direct materials requirements are 2 pounds of a rubber compound per tire. The cost of the compound is $9.50 per pound f. Desired ending Raw Materials Inventory is 10% of the next quarter's direct materials needed for production; desired ending inventory for December 31, 2019 is 200 pounds; indirect materials are insignificant and not considered for budgeting purposes. g. Each tire requires 0.60 hours of direct labor: direct labor costs average $16 per hour. h. Variable manufacturing overhead is $2 per tire. i. Fixed manufa i. Fixed manufacturing overhead includes $3,500 per quarter in depreciation and $28,220 per quarter for other costs, such as utilities, insurance, and property taxes. j. Fixed selling and administrative expenses include $8,000 per quarter for salaries; $5,700 per quarter for rent; $1,650 per quarter for insurance; and $1,000 per quarter for depreciation. k. Variable selling and administrative expenses include supplies at 1% of sales. 1. Capital expenditures include $35,000 for new manufacturing equipment, to be purchased and paid in the first quarter. m. Cash receipts for sales on account are 80% in the quarter of the sale and 20% in the quarter following the sale; December 31, 2018, Accounts Receivable is received in the first quarter of 2019; uncollectible accounts are considered insignificant and not considered for budgeting purposes. n. Direct materials purchases are paid 80% in the quarter purchased and 20% in the following quarter; December 31, 2018, Accounts Payable is paid in the first quarter of 2019. 0. Direct labor, manufacturing overhead, and selling and administrative costs are paid in the quarter incurred. p. Income tax expense is projected at $3,000 per quarter and is paid in the quarter incurred. q. Gessing desires to maintain a minimum cash balance of $50,000 and borrows from the local bank as needed in increments of $1,000 at the beginning of the quarter; principal repayments are made at the beginning of the quarter when excess funds are available and in increments of $1,000; interest is 6% per year and paid at the beginning of the quarter based on the amount outstanding from the previous quarter