a. Budgeted sales are 700 tires for the first quarter and expected to increase by 50 tires per quarter. All sales are on account. b. Finished Goods Inventory on December 31 consists of 200 tires at $29 each. c. Desired ending Finished Goods Inventory is 20% of the next quarter's sales; first quarter sales for 2022 are expected be 900 tires. d. Each tire requires 3 pounds of rubber, is costs $3 per pound. c. Desired ending Raw Materials Inventory is 20% of the next quarter's direct materials needed for production; desired ending inventory for December 31, 2022 is $900. The company started 2021 with 600 pounds of materials at the cost of $5 each. f. Each tire requires 0.40 hours of direct labor; direct labor costs average $10 per hour. The company applies "a layoff policy". g. Variable manufacturing overhead is $13 per labor hour. h. Fixed manufacturing overhead includes $3,000 per quarter in depreciation and $1,770 per quarter for other costs, such as insurance. i. Fixed selling and administrative expenses include $7,500 per quarter for salaries; $3, 150 per quarter for rent; $1,500 per quarter for insurance; and $2,000 per quarter for depreciation. j. Variable selling and administrative expenses is $1 per unit sold. k. Capital expenditures include $47,000 for new manufacturing equipment, to be purchased and paid in the first quarter. Another $25,000 cash purchase of equipment will be made in quarter 4. I. Cash receipts for sales on account are 65% in the quarter of the sale and 35% in the quarter following the sale; December 31, 2020, Accounts Receivable is received in the first quarter of 2021. m. Direct materials purchases are paid 75% in the quarter purchased and 25% in the following quarter; December 31, 2020, Accounts Payable is paid in the first quarter of 2021. n. Direct labor, manufacturing overhead, and selling and administrative costs are paid in the quarter incurred. o. Common Stock at year end 2021 will be $122,878.9 p. DiamondStone desires to maintain a minimum cash balance of $5,000 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 12% per year and paid at the beginning of the quarter based on the amount outstanding from the previous quarter. Requirements 1. Prepare DiamondStone's operating budget and cash budget for 2021 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, cash collections of sales, cash payments for materials, and cash budget. Manufacturing overhead costs are allocated based on direct labor hours. 2. Prepare DiamondStone's annual financial budget for 2021, including budgeted income statement and budgeted balance sheet