Grady Tire Company Direct Materials Budget For the Year Ended December 31, 2025 a. Budgeted sales are 1,600 tires for the first quarter and expected to increase by 200 tires per quarter. Cash sales are expected to be 20% of total sales, with the remaining 80% of sales on account. b. Finished Goods Inventory on December 31, 2024 consists of 700 tires at $29 each. c. Desired ending Finished Goods Inventory is 30% of the next quarter's sales; first quarter sales for 2026 are expected be 2,400 tires. FIFO inventory costing method is used. d. Raw Materials Inventory on December 31, 2024, consists of 1,400 pounds of rubber compound used to manufacture the tires. e. Direct materials requirements are two pounds of a rubber compound per tire. The cost of the compound is $6.00 per pound. f. Desired ending Raw Materials Inventory is 40% of the next quarter's direct materials needed for production; desired ending inventory for December 31,2025 is 1,400 pounds; indirect materials are insignificant and not considered for budgeting purposes. g. Each tire requires 0.50 hours of direct labor; direct labor costs average $20 per hour. h. Variable manufacturing overhead is $2 per tire. i. Fixed manufacturing overhead includes $3,000 per quarter in depreciation and $12,240 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; $1,200 per quarter for insurance; and $1,000 per quarter for depreciation. k. Variable selling and administrative expenses include supplies at 1% of sales. I. Capital expenditures include $40,000 for new manufacturing equipment, to be purchased and paid in the first quarter