P7-2 Sales, Production, Direct Labor, Direct Materialsand Fa

ctory Overhead

Cruise Tire Company's budgeted unit sales for the year 2013 were: The budgeted selling price for truck tires was $200 per tire, and that for passenger car tires was $65 per tire. The beginning finished goods inventories were expected to be 2,000 truck tires (at the cost of 120) and 5,000 passenger tires (at the cost of 35), with desired ending inventories at 2,360 and 6,590, respectively. There was no anticipated beginning or ending work in process inventory for either type of tire. Reject rates arising from an inspection at the end of each department are following: The standard materials quantities for each type of tire were as follows: The purchase prices of rubber and steel were $2 and $3 per pound, respectively. The desired ending inventories for rubber and steel were 60,000 and 6,000 pounds, respectively. The beginning inventories for rubber and steel were 75,000 and 7,000 pounds, respectively. The direct labor hours required for each type of tire were as follows: The direct labor rate for each department is as follows: Budgeted factory overhead costs for 2012 were as follows: Budgeted selling and administrative expenses for Cruise Tire Company for the year ended December 31, 2011, were as follows: Prepare budgets according to the chosen budgeting method Explain the budgeting process based on the information provided in the scenario Prepare operating budgets and budgeted income statement for Cruise Tire company