a. Budgeted sales are 900 sets for the first quarter and expected to increase by 100 sets per quarter. Cash sales are expected to be 30% of total sales, with the remaining 70% of sales on account. Sets are budgeted to sell for $70 per set. b. Finished Goods Inventory on December 31, 2018, consists of 150 sets at $29 each. c. Desired ending Finished Goods Inventory is 30% of the next quarter's sales; first quarter sales for 2020 are expected to be 1,300 sets. FIFO inventory costing method is used. d. Raw Materials Inventory on December 31, 2018, consists of 900 pounds. Direct materials requirement is 6 pounds per set. The cost is 1 per pound. e. 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 900 pounds; indirect materials are insignificant and not considered for budgeting purposes. f. Each set requires 0.40 hours of direct labor; direct labor costs average 10 per hour. g. Variable manufacturing overhead is $4.00 per set. h. Fixed manufacturing overhead includes $4,500 per quarter in depreciation and $3,492 per quarter for other costs, such as utilities, insurance, and property taxes. i. Fixed selling and administrative expenses include $9,500 per quarter for salaries; $4,800 per quarter for rent; $1,050 per quarter for insurance; and $500 per quarter for depreciation. j. Variable selling and administrative expenses include supplies at 2% of sales. k. Capital expenditures include $35,000 for new manufacturing equipment, to be purchased and paid for in the first quarter. I. Cash receipts for sales on account are 50% in the quarter of the sale and 50% in the quarter following the sale; Accounts Receivable balance on December 31, 2018, is expected to be received in the first quarter of 2019; uncollectible accounts are considered insignificant and not considered for budgeting purposes. m. Direct materials purchases are paid 70% in the quarter purchased and 30% in the following quarter; Accounts Payable balance on December 31, 2018, is expected to be paid in the first quarter of 2019. n. Direct labor, manufacturing overhead, and selling and administrative costs are paid in the quarter incurred. o. Income tax expense is projected at $1,500 per quarter and is paid in the quarter incurred. p. Tricia desires to maintain a minimum cash balance of $35,000 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 4% per year and paid at the beginning of the quarter based on the amount outstanding from the previous quarter. Current Assets: Cash Tricia Toy Company Balance Sheet December 31, 2018 Accounts Receivable Raw Materials Inventory Finished Goods Inventory Total Current Assets Property, Plant, and Equipment: Equipment Assets Less: Accumulated Depreciation Total Assets Current Liabilities: Accounts Payable Liabilities 10,000 55,000 900 4,350 70,250 199,000 (42,000) 157,000 $ 227,250 Stockholders' Equity Common Stock, no par $ 150,000 Retained Earnings 67,250 Total Stockholders' Equity Total Liabilities and Stockholders' Equity 10,000 217,250 $ 227,250 1. Prepare Tricia'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 Tricia's annual financial budget for 2019, including budgeted income statement and budgeted balance sheet. 3. Tricia sold 4,900 sets in 2019, and its actual operating income was as follows: (Click the icon to view the actual income statement.) Prepare a flexible budget performance report through operating income for 2019. 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 2019, assume the following product costs: (Click the icon to view the product costs.) Tricia Toy Company Income Statement For the Year Ended December 31, 2019 Net Sales Revenue Cost of Goods Sold: Variable Fixed EA 343,000 83,980 29,768 113,748 229,252 Gross Profit Selling and Administrative Expenses: Variable 6,860 Fixed 63,400 70,260 Operating Income 158,992 Other Income and (Expenses): Interest Expense Income Before Income Taxes Income Tax Expense Net Income $ EA (590) 158,402 12,000 146,402 Variable Fixed Total Static budget $ 58,242 $ 31,968 $ 90,210 Flexible budget 82,680 31,968 114,648 4. What was the effect on Tricia's operating income of selling 700 sets more than the static budget level of sales? 5. What is Tricia's static budget variance for operating income? 6. Explain why the flexible budget performance report provides more useful information to Tricia's managers than the static budget performance report. What insights can Tricia's managers draw from this performance report? 7. During 2019, Tricia recorded the following cost data: (Click the icon to view the standard cost data.) (Click the icon to view the actual cost data.) Compute the cost and efficiency variances for direct materials and direct labor. Standard Cost Information Quantity Cost Direct materials 6 pounds per set $1 per pound Direct labor 0.40 hours per set Variable manufacturing overhead 0.40 hours per set $10 per hour $10 per hour Fixed manufacturing overhead Static budget amount: $31,968 0.40 hours per set $16.80 per hour Actual Cost Information Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead (29,200 pounds @ $1.50 per pound) $ 43,800 (1,930 hours @ $10.10 per hour) 19,493 (1,930 hours @ $9.50 per hour) 18,335 29,768 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 2019. 10. Calculate Tricia's ROI for 2019. To calculate average total assets, use the December 31, 2018, balance sheet for the beginning balance and the budgeted balance sheet for December 31, 2019, for the ending balance. Round all of your answers to four decimal places. 11. Calculate Tricia's profit margin ratio for 2019. Interpret your results. 12. Calculate Tricia's asset turnover ratio for 2019. Interpret your results. 13. Use the expanded ROI formula to confirm your results from Requirement 10. Interpret your results. 14. Tricia's management has specified a 10% target rate of return. Calculate Tricia's RI for 2019. Interpret your results. The Tricia Toy Company manufactures toy building block sets for children. Tricia is planning for 2019 by developing a master budget by quarters. Tricia's balance sheet for December 31, 2018, follows: (Click the icon to view the balance sheet.) Other budget data for Tricia Toy Company: (Click the icon to view the other data.) Read the requirements