1. Prepare Trolley's operating budget and cash budget for 2025 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 Trolley's annual financial budget for 2025, including budgeted income statement and budgeted balance sheet. 3. Trolley sold 7,000 sets in 2025, and its actual operating income was as follows: Trolley Toy Company Income Statement For the Year Ended December 31, 2025 Net Sales Revenue $ 630,000 Cost of Goods Sold: Variable Fixed Gross Profit 94,890 36,540 131,430 498,570 Selling and Administrative Expenses: Variable 12,600 Fixed 61,400 74,000 Operating Income 424,570 Other Income and (Expenses): Interest Expense Income Before Income Taxes Income Tax Expense Net Income (425) 424,145 22,000 EA $ 402,145 Prepare a flexible budget performance report through operating income for 2025. Show product costs separately from selling and administrative costs. To simplify the calculations due to sets in beginning inventory having a different cost than those produced and sold in 2025, assume the following product costs: Variable Fixed Total Static budget $ 84,240 $ 38,340 $ 122,580 Flexible budget 93,940 38,340 132,280 4. What was the effect on Trolley's operating income of selling 500 sets more than the static budget level of sales? 5. What is Trolley's static budget variance for operating income? 6. Explain why the flexible budget performance report provides more useful information to Trolley's managers than the static budget performance report. What insights can Trolley's managers draw from this performance report? 7. During 2025, Trolley recorded the following cost data below. Compute the cost and efficiency variances for direct materials and direct labor. Standard Cost Information Quantity Cost Direct materials Direct labor 3 pounds per set 0.30 hours per set $2 per pound $12 per hour Variable manufacturing overhead 0.30 hours per set Fixed manufacturing overhead Static 0.30 hours per set $12 per hour $21.00 per hour budget amount: $38,340 Actual Cost Information Direct materials (20,700 pounds @ $2.50 per pound) $ 51,750 Direct labor Variable manufacturing overhead (2,060 hours @ $12.40 per hour) (2,060 hours @ $11.60 per hour) 25,544 23,896 Fixed manufacturing overhead 36,540 8. For manufacturing overhead, compute the variable overhead cost and efficiency variances and the fixed overhead cost and volume variances. 9. Prepare the standard cost income statement for 2025. 10. Calculate Trolley's ROI for 2025. To calculate average total assets, use the December 31, 2024, balance sheet for the beginning balance and the budgeted balance sheet for December 31, 2025, for the ending balance. Round all of your answers to four decimal places. 11. Calculate Trolley's profit margin ratio for 2025. Interpret your results. 12. Calculate Trolley's asset turnover ratio for 2025. Interpret your results. 13. Use the expanded ROI formula to confirm your results from Requirement 10. Interpret your results. 14. Trolley's management has specified a 30% target rate of return. Calculate Trolley's RI for 2025. Interpret your results. Trolley Toy Company Balance Sheet December 31, 2024 Assets Current Assets: Cash 58,000 Accounts Receivable 22,000 Raw Materials Inventory 1,200 Finished Goods Inventory 5,400 Total Current Assets 86,600 Property, Plant, and Equipment: Equipment Less: Accumulated Depreciation Total Assets Current Liabilities: Accounts Payable Liabilities 142,000 (47,000) 95,000 $ 181,600 Stockholders' Equity Common Stock, no par $ 120,000 Retained Earnings 53,600 Total Stockholders' Equity Total Liabilities and Stockholders' Equity 8,000 173,600 $ 181,600 Begin by preparing the sales budget. Trolley Toy Company Sales Budget For the Year Ended December 31, 2025 First Second Third Fourth Quarter Quarter Quarter Quarter Total Budgeted sets to be sold 1,400 1,550 1,700 1,850 6,500 Sales price per unit $ 90 $ 90 $ 90 $ 90 $ 90 Total sales Prepare the production budget. $ 126,000 $ 139,500 $ 153,000 || $ 166,500 $585,000 Review the sales budget you prepared above. Trolley Toy Company Production Budget For the Year Ended December 31, 2025 First Second Third Fourth Quarter Quarter Quarter Quarter Total Budgeted sets to be sold 1,400 1,550 1,700 1,850 6,500 Plus: Desired sets in ending inventory 620 680 740 800 800 Total sets needed 2,020 2,230 2,440 2,650 7,300 Less: Sets in beginning inventory 200 620 680 740 200 1,820 1,610 1,760 1,910 7,100 Budgeted sets to be produced Review the production budget you prepared above. Trolley Toy Company Direct Materials Budget For the Year Ended December 31, 2025 First Quarter Second Third Fourth Quarter Quarter Quarter Total Budgeted sets to be produced 1,820 1,610 1,760 1,910 7,100 3 3 3 3 3 Direct materials per set (pounds) Direct materials needed for production 5,460 4,830 5,280 5,730 21,300 Plus: Desired direct materials in ending inventory 483 528 573 600 600 Total direct materials needed 5,943 5,358 5,853 6,330 21,900 Less: Direct materials in beginning inventory 600 483 528 573 600 Budgeted purchases of direct materials 5,343 4,875 5,325 5,757 21,300 $ Direct materials cost per pound Budgeted cost of direct materials purchases 2 $ 2 $ 2 $ 2 $ 2 S 10,686 $ 9,750 $ 10,650 || $ 11,514 $ 42,600 Review the production budget you prepared above. Trolley Toy Company Direct Labor Budget For the Year Ended December 31, 2025 First Second Third Fourth Quarter Quarter Quarter Quarter Total Budgeted sets to be produced 1,820 1,610 1,760 1,910 7,100 Direct labor hours per unit 0.30 0.30 0.30 0.30 0.30 Direct labor hours needed for production 546 483 528 573 2,130 Direct labor cost per hour $ 12 $ 12 $ 12 $ 12 $ 12 $ 6,552 $ 5,796 $ 6,336 $ 6,876 || $ 25,560 Budgeted direct labor cost Budgeted sets to be produced VOH cost per set Budgeted VOH Trolley Toy Company Manufacturing Overhead Budget For the Year Ended December 31, 2025 First Second Third Fourth Quarter Quarter Quarter Quarter Total 1,820 1,610 1,760 1,910 7,100 3.60 $ 3.60 || $ 3.60 $ 3.60 $ 3.60 6,552 $ 5,796 $ 6,336 $ 6,876 || $ 25,560 GA Budgeted FOH Depreciation 7,000 7,000 7,000 7,000 28,000 Utilities, insurance, property taxes 2,585 2,585 2,585 2,585 10,340 9,585 9,585 9,585 9,585 38,340 Total budgeted FOH 16,137 $ 15,381 $ 15,921 $ 16,461 $ 63,900 Budgeted manufacturing overhead costs Direct labor hours 546 483 528 573 2,130 Budgeted manufacturing overhead costs 63,900 30 Predetermined overhead allocation rate Before preparing the cost of goods sold budget, calculate the projected manufacturing cost per set for 2025. (Round all amoun Direct materials cost per set Direct labor cost per set Manufacturing overhead cost per set Total projected manufacturing cost per set for 2025 6A 6.00 3.60 9.00 18.60 Review the production budget you prepared above. Trolley Toy Company Cost of Goods Sold Budget For the Year Ended December 31, 2025 First Quarter Second Quarter Third Fourth Quarter Quarter Total Beginning inventory $ 5,400 $ 5,400 Sets produced and sold in 2025 22,320 $ 28,830 $ 31,620 $ 34,410 117,180 27,720 $ Total budgeted cost of goods sold 28,830 $ 31,620 $ 34,410||$ 122,580 Review the sales budget you prepared above. Trolley Toy Company Selling and Administrative Expense Budget For the Year Ended December 31, 2025 First Quarter Second Quarter Third Fourth Quarter Quarter Total Salaries Expense Rent Expense Insurance Expense Depreciation Expense $ 11,000 $ 11,000 || $ 11,000 $ 11,000 $ 44,000 1,500 1,500 1,500 1,500 6,000 1,350 1,350 1,350 1,350 5,400 1,500 1,500 1,500 1,500 6,000 Supplies Expense 2,520 2,790 3,060 3,330 11,700 $ Total budgeted selling and administrative expense 17,870 || $ 18,140 || $ 18,410 || $ 18,680 || $ 73,100 Cash Receipts from Customers Total sales First Second Third Fourth Quarter Quarter Quarter Quarter Total $ 126,000 $ 139,500 $ 153,000 $166,500 $585,000 First Second Third Fourth Quarter Quarter Quarter Quarter Total Cash Receipts from Customers: Accounts Receivable balance, December 31, 2024 1st Qtr.-Cash sales $ 22,000 37,800 35,280 $ 52,920 41,850 39,060 1st Qtr.-Credit sales, collection of Qtr. 1 sales in Qtr. 1 1st Qtr.-Credit sales, collection of Qtr. 1 sales in Qtr. 2 2nd Qtr.-Cash sales 2nd Qtr.-Credit sales, collection of Qtr. 2 sales in Qtr. 2 2nd Qtr.-Credit sales, collection of Qtr. 2 sales in Qtr. 3 3rd Qtr.-Cash sales 3rd Qtr.-Credit sales, collection of Qtr. 3 sales in Qtr. 3 3rd Qtr.-Credit sales, collection of Qtr. 3 sales in Qtr. 4 4th Qtr.-Cash sales 4th Qtr.-Credit sales, collection of Qtr. 4 sales in Qtr. 4 Total cash receipts from customers $ 58,590 45,900 42,840 $ 64,260 49,950 46,620 95,080 $133,830 || $ 147,330 || $ 160,830 || $ 537,070 Accounts Receivable balance, December 31, 2025: 4th Qtr.-Credit sales, collection of Qtr. 4 sales in Qtr. 1 of 2026 69,930 Cash Payments First Second Third Fourth Quarter Quarter Quarter Quarter Total Total direct materials purchases Cash Payments Direct Materials: Accounts Payable balance, December 31, 2024 1st Qtr.-Qtr. 1 direct material purchases paid in Qtr. 1 1st Qtr.-Qtr. 1 direct material purchases paid in Qtr. 2 2nd Qtr.Qtr. 2 direct material purchases paid in Qtr. 2 2nd Qtr.-Qtr. 2 direct material purchases paid in Qtr. 3 3rd Qtr.Qtr. 3 direct material purchases paid in Qtr. 3 3rd Qtr.-Qtr. 3 direct material purchases paid in Qtr. 4 4th Qtr.-Qtr. 4 direct material purchases paid in Qtr. 4 Total payments for direct materials Direct Labor: Total payments for direct labor First Second Quarter Third Quarter Quarter Quarter Fourth Total