Giseppe Tire Company Production Budget For the Year Ended December 31, 2019 First Second Third Fourth Quarter Quarter Quarter Quarter Total Budgeted tires to be sold 1,900 1,600 700 1,750 760 2,050 880 7,300 880 820 Plus: Desired tires in ending inventory Total tires needed 2,930 2,300 200 2,510 700 2,720 760 820 8,180 200 Less: Tires in beginning inventory 2,100 1,960 1,810 2,110 Budgeted tires to be produced 7,980 Giseppe Tire Company Direct Materials Budget For the Year Ended December 31, 2019 First Second Third Fourth Quarter Quarter Quarter Quarter Total Budgeted tires to be produced 2,100 1,810 1,960 2,110 7,980 Direct materials per tire Direct materials needed for production 4,200 1,448 3,620 1,568 3,920 1,688 4,220 400 15,960 400 Plus: Desired direct materials in ending inventory Total direct materials needed 5,188 5,648 400 5,608 1,568 4,620 1,688 16,360 400 1,448 Less: Direct materials in beginning inventory Budgeted purchases of direct materials 5,248|| 9.50 $ 3,740 9.50 $ 4,040 9.50 $ 2,932 9.50 $ 15,960 9.50 A Direct materials cost per pound 49,856 $ 35,530||$ 38,380 $ 27,854 $ 151,620 Budgeted cost of direct materials Cash Receipts from Customers First Second Third Fourth Quarter Quarter Quarter Quarter Total Total sales 584,000 $ 128,000 $ 140,000 $ 152,000 $ 164,000 $ First Second || Third Fourth Quarter Quarter Quarter Quarter Total Cash Receipts from Customers: Accounts Receivable balance, December 31, 2018 $ 1st Qtr.Cash sales | 25,000 12,800 | 69,120 $ 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 46,080 14,000 75,600 $ 50,400 15,200 82,080 $ 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 54,720 16,400 88,560 147,680||$ 159,680 $ 106,920||$ 135,680||$ 549,960 Total cash receipts from customers Accounts Receivable balance, December 31, 2019: 4th Qtr.Credit sales, collection of Qtr. 4 sales in Qtr. 1 of 2020 $ 59,040 Cash Payments First Second Third Fourth Quarter Quarter Quarter Quarter Total Total direct materials purchases 151,620 $ 49,856$ 35,530|| $ 38,380 $ 27,854 $ First Second Third Fourth Quarter Quarter Quarter Quarter Total Cash Payments $ 15,000 39,885 $ Direct Materials: Accounts Payable balance, December 31, 2018 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 9,971 28,424 $ 7,106 30,704 $ 7,676 4th Qtr.Qtr. 4 direct material purchases paid in Qtr. 4 22,283 29,959 54,885 38,395 37,810 $ 161,049 Total payments for direct materials Direct Labor: Total payments for direct labor 16,800|| 14,480| 15,680|| 16,880|| 63,840 Manufacturing Overhead: 2,110 7,980 Variable manufacturing overhead Utilities, insurance, property taxes 2,100 14,157 16,257 1,810 14,157 15,967 1,960 14,157 16,117 14.157 56,628 Total payments for manufacturing overhead 16,267 64,608 Selling and Administrative Expenses: Salaries Expense 14,000 14,000 3,600 14,000 3,600 Rent Expense 3,600 14,000 3,600 900 56,000 14,400 3,600 Insurance Expense 900 900 900 Supplies Expense Total payments for Selling and Admin. expenses 3,840 22,340|| 4,200 22,700|| 4,560 23,060|| 4,920 23,420|| 17,520 91,520 Income Taxes: Total payments for income taxes 3,500 3,500 3,500 3,500 14,000 Capital Expenditures: Total payments for capital expenditures 30,000 30,000 Total cash payments (before interest) $ 143,782 $ 95,042 $ 96,167 $ 90,026||$ 425,017 Accounts Payable balance, December 31, 2019: 4th Qtr.Qtr. 4 direct material purchases paid in Qtr. 1 of 2020 5,571 $ 5,571 Giseppe Tire Company Cash Budget For the Year Ended December 31, 2019 First Second Third Fourth Quarter Quarter Quarter Quarter Total Beginning cash balance 70,000 $ 106,920 70,138 $ 135,680 73,221 | $ 147,680 124,734 $ 159,680 70,000 549,960 Cash receipts Cash available 176,920 | 205,818 220,901 284,414 619,960 Cash payments: Capital expenditures 30,000 Purchases of direct materials 161,049 Direct labor 30,000 54,885 16,800 16,257 22,340 63,840 Manufacturing overhead Selling and administrative expenses 38,395 14,480 15,967 22,700 3,500 555 37,810 15,680 16,117 23,060 3,500 29,959 16,880 16,267 23,420 3,500 64,608 91,520 14,000 555 Income taxes 3,500 Interest expense Giseppe Tire Company Budgeted Income Statement For the Year Ended December 31, 2019 Sales Revenue 584,000 266,660 Cost of Goods Sold Gross Profit 317,340 95,520 Selling and Administrative Expenses Operating Income 221,820 555 Interest Expense Income before Income Taxes Income Tax Expense 221,265 14,000 207,265 $ Net Income (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 1,600 tires for the first quarter and expected to increase by 150 tires per quarter. Cash sales are expected to be 10% of total sales, with the remaining 90% of sales on account. b. Finished Goods Inventory on December 31, 2018 consists of 200 tires at $34 each. c. Desired ending Finished Goods Inventory is 40% of the next quarter's sales; first quarter sales for 2020 are expected be 2,200 tires. FIFO inventory costing method is used. d. Raw Materials Inventory on December 31, 2018, consists of 400 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. Desired ending Raw Materials Inventory is 40% of the next quarter's direct materials needed for production; desired ending inventory for December 31, 2019 is 400 pounds; indirect materials are insignificant and not considered for budgeting purposes. g. Each tire requires 0.40 hours of direct labor; direct labor costs average $20 per hour. h. Variable manufacturing overhead is $1 per tire. i. Fixed manufacturing overhead includes $3,000 per quarter in depreciation and $14,157 per quarter for other costs, such as utilities, insurance, and property taxes. j. Fixed selling and administrative expenses include $14,000 per quarter for salaries; $3,600 per quarter for rent; $900 per quarter for insurance; and $1,000 per quarter for depreciation. k. Variable selling and administrative expenses include supplies at 3% of sales. I. Capital expenditures include $30,000 for new manufacturing equipment, to be purchased and paid in the I. Capital expenditures include $30,000 for new manufacturing equipment, to be purchased and paid in the first quarter. m. Cash receipts for sales on account are 60% in the quarter of the sale and 40% 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 $3,500 per quarter and is paid in the quarter incurred. q. Giseppe desires to maintain a minimum cash balance of $70,000 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. Giseppe Tire Company Budgeted Balance Sheet December 31, 2019 Assets Current Assets: Cash Accounts Receivable Raw Materials Inventory Finished Goods Inventory Total Current Assets Property, Plant, and Equipment: Equipment Less: Accumulated Depreciation Total Assets Liabilities Liabilities Current Liabilities: Accounts Payable Stockholders' Equity Common Stock, no par Retained Earnings Total Stockholders' Equity Total Liabilities and Stockholders' Equity