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Operating budgets problem-manufacturing company The Gavin Tire Company manufactures racing tires for bicycles. Gavin is planning for the next year by developing a master budget
Operating budgets problem-manufacturing company The Gavin Tire Company manufactures racing tires for bicycles. Gavin is planning for the next year by developing a master budget by quarters. Data for Gavin Tire Company: a. Budgeted sales are 1,000 tires for the first quarter of 2019 and expected to increase by 200 tires per quarter. b. Finished Goods Inventory on December 31, 2018, consists of 300 tires. Desired ending Finished Goods Inventory is 40% of the next quarter's sales. c. Raw Materials Inventory on December 31, 2018 consists of 750 pounds of rubber compound used to manufacture the tires. d. Direct materials requirements are 2.5 pounds of rubber compound per tire. The cost of the compound Is $4 per pound. e. Desired ending Raw Materials Inventory is 40% of the next quarter's direct materials needed for production. Requirements 1. Prepare Gavin's production budget and direct materials budget for the first quarter and second quarter only. Round all calculations to the nearest dollar. Gavin Tire Company Production Budget For the First and Second Quarters of 2019 First Quarter Second Quarter Budgeted tires to be sold Plus: Desired tires in ending inventory Total tires needed Less: Tires in beginning inventory Budgeted tires to be produced Gavin Tire Company Direct Materials Budget For the First and Second Quarters of 2019 First Quarter Second Quarter Budgeted tires to be produced Direct materials per tire Direct materials needed for production Plus: Desired direct materials in ending inventory Total direct materials needed Less: Direct materials in beginning inventory Budgeted purchases of direct materials Direct materials cost per pound Budgeted purchases of direct materials
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