Direct materials cost per set Direct labor cost per set Manufacturing overhead cost per set 4.00 5.60 13.60 23.20 $ Total projected manufacturing cost per set for 2019 Now prepare the cost of goods sold budget. Review the sales budget you prepared above. Review the production budget you prepared above. Tinted Toy Company Cost of Goods Sold Budget For the Year Ended December 31, 2019 First Second Third Quarter Quarter Quarter Fourth Quarter Total $ 11,900 $ 11,900 1166961 230841 34684 Beginning inventory Sets produced and sold in 2019 Total budgeted cost of goods sold 128596 Tinted Toy Company Balance Sheet December 31, 2018 Assets Current Assets: Cash Accounts Receivable Raw Materials Inventory 35,000 50,000 1,400 11,900 98,300 Finished Goods Inventory Total Current Assets Property, Plant, and Equipment: Equipment 194,000 (32,000) 162,000 Less: Accumulated Depreciation 260,300 Total Assets Liabilities Current Liabilities: Accounts Payable 12,000 Stockholders' Equity $ Common Stock, no par 100,000 148,300 Retained Earnings 248,300 Total Stockholders' Equity 260,300 Total Liabilities and Stockholders' Equity i. (Unless otherwise noted, assume all of the following events occurred during 2018 and that any balances given are stated as of December 31, 2018.) a. Budgeted sales are 1,000 sets for the first quarter and expected to increase by 150 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 350 sets at $34 each. Desired ending Finished Goods Inventory is 30% of the next quarter's sales; first quarter sales for 2020 are expected to be 1,600 sets. FIFO inventory costing method is used. d. Raw Materials Inventory on December 31, 2018, consists of 1,400 pounds. Direct materials requirement is 4 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 1,400 pounds; indirect materials are insignificant and not considered for budgeting purposes. Each set requires 0.40 hours of direct labor; direct labor costs average $14 per hour. g. Variable manufacturing overhead is $5.60 per set. h. Fixed manufacturing overhead includes $6,000 per quarter in depreciation and $4,060 per quarter for other costs, such as utilities, insurance, and property taxes. Fixed selling and administrative expenses include $8,500 per quarter for salaries; $5,400 per quarter for rent; $600 per quarter for insurance; and $1,500 per quarter for depreciation. j. Variable selling and administrative expenses include supplies at 2% of sales. k. Capital expenditures include $25,000 for new manufacturing equipment, to be purchased and paid for in the first quarter. Cash receipts for sales on account are 70% in the quarter of the sale and 30% 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 80% in the quarter purchased and 20% 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. Income tax expense is projected at $1,500 per quarter and is paid in the quarter incurred. p. Tinted desires to maintain a minimum cash balance of $20,000 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 5% per year and paid at the beginning of the quarter based on the amount outstanding from the previous quarter. Tinted Toy Company Sales Budget For the Year Ended December 31, 2019 First Second Third Quarter Quarter Quarter First second third Fourth Fourth Quarter Total 1,000 1,150 1.300 1,450 4,900 Budgeted sets to be sold Sales price per unit 70 70,000 $ 80,500 91,000 $ 101,500 $ 343,000 Total sales Tinted Toy Company Production Budget For the Year Ended December 31, 2019 First Second Third Quarter Quarter Quarter Fourth Quarter Total 1,000 345 1,150 390 1,300 435 1,450 480 4,900 480 Budgeted sets to be sold Plus: Desired sets in ending inventory Total sets needed Less: Sets in beginning inventory 1,540 1,345 350 995 1,735 390 1,930 435 5,380 350 345 Budgeted sets to be produced 1,195 1,345 1,495 5,030