P7-2. Sales, Production, Direct Materials, Direct Labor, and Factory Overhead Budgets

King Tire Co.s budgeted unit sales for the year 2016 were:

The budgeted selling price for truck tires was $200 per tire, and for passenger car tires it was $65 per tire. The beginning finished goods inventories were expected to be 2,000 truck tires and 5,000 passenger tires, for a total cost of $326,478, with desired ending inventories at 2,500 and 6,000, respectively, with a total cost of $400,510. There was no anticipated beginning or ending work-in-process inventory for either type of tire. 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 lb, respectively. The estimated beginning inventories for rubber and steel were 75,000 and 7,000 lb, 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 2016 were as follows:

REQUIRED:
a) Prepare each of the following budgets for King for the year ended December 31, 2016:

1. Sales budget.

2. Production budget.

3. Direct material budget.

4. Direct labor budget.

5. Factory overhead budget.

6. Cost of goods sold budget.

Passenger-car tires 120,000 Truck tires 25,000 Passenger Rubber. Steel belts Truck30lb4lbCar10lb1.5lb Truck tire MoldingDepartment0.250.10FinishingDepartment0.150.05 Molding Department $15 per hour Finishing Department $13 per hour Indirect materials. $198,500 Indirect labor 213,200 Depreciation of building and equipment 157,500 Power and light . 122,900 Total $692,100