Requirement 1. Prepare Tamison's operating budget and cash budget for 2019 by quarter. Required schedules and budgets include: sales budget, production budget, direct materials budget, direct labor budget, manufacturing overhead budget, cost of goods sold budget, selling and administrative expense budget, schedule of cash receipts, schedule of cash payments, and cash budget. Manufacturing overhead costs are allocated based on direct labor hours. (Round all calculations to the nearest dollar.) Begin by preparing the sales budget. Budgeted sets to be sold Sales price per unit Total sales Tamison Toy Company Sales Budget For the Year Ended December 31, 2019 First Third Quarter Quarter $ S 1,000 70 Second Quarter 1,050 1,100 70 70 $ 70,000 $ 73,500 $ 77,000 S Fourth Quarter 1,150 70 $ 80,500 $ Total 4,300 70 301,000 Prepare the production budget. Review the sales budget you prepared above. Tamison Toy Company Production Budget For the Year Ended December 31, 2019 Budgeted sets to be sold Plus: Desired sets in ending inventory Total sets needed Less: Sets in beginning inventory Budgeted sets to be produced First Quarter 1,000 315 1,315 350 965 Second Quarter 1,050 330 1,380 315 1,065 Third Quarter 1,100 345 1,445 330 1,115 Fourth Quarter 1,150 360 1,510 345 1,165 Total 4,300 360 4,660 350 4,310 The Tamison Toy Company manufactures toy building block sets for children. Tamison is planning for 2019 by developing a master budget by quarters. Tamison's balance sheet for December 31, 2018, follows: (Click the icon to view the balance sheet.) Other budget data for Tamison Toy Company: i (Click the icon to view the other data.) Read the requirements. Direct Materials Budget For the Year Ended December 31, 2019 First Quarter Second Quarter Budgeted sets to be produced Direct materials per set (pounds) 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 cost of direct materials purchases X 965 3860 1,065 4 4260 Third Quarter 1,115 4460 Fourth Quarter 1,165 4660 Total 4,310 17240 Current Assets: Cash Accounts Receivable Raw Materials Inventory Finished Goods Inventory Total Current Assets Property, Plant, and Equipment: Equipment Less: Accumulated Depreciation Total Assets Current Liabilities: Accounts Payable Tamison Toy Company Balance Sheet December 31, 2018 Assets Common Stock, no par Retained Earnings Liabilities $ Stockholders' Equity S Total Stockholders' Equity Total Liabilities and Stockholders' Equity 35,000 50,000 1,400 11,900 194,000 (32,000) 100,000 148,300 $ $ 98,300 162,000 260,300 12,000 248,300 260,300 (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 1,000 sets for the first quarter and expected to increase by 50 sets per quarter. Cash sales are expected to be 30% of total sales, with the remaining 70% of sales on account. Sets are budgeted to sell for $70 per set. b. Finished Goods Inventory on December 31, 2018, consists of 350 sets at $34 each. c. Desired ending Finished Goods Inventory is 30% of the next quarter's sales; first quarter sales for 2020 are expected to be 1,200 sets. FIFO inventory costing method is used. d. Raw Materials Inventory on December 31, 2018, consists of 1,400 pounds. Direct materials requirement is 4 pounds per set. The cost is $1 per pound. e. Desired ending Raw Materials Inventory is 10% of the next quarter's direct materials needed for production; desired ending inventory for December 31, 2019, is 1,400 pounds; indirect materials are insignificant and not considered for budgeting purposes. f. Each set requires 0.40 hours of direct labor, direct labor costs average $14 per hour. g. Variable manufacturing overhead is $5.60 per set. h. Fixed manufacturing overhead includes $5,500 per quarter in depreciation and $534 per quarter for other costs, such as utilities, insurance, and property taxes. i. Fixed selling and administrative expenses include $8,500 per quarter for salaries; $3,600 per quarter for rent; $1,800 per quarter for insurance; and $1,000 per quarter for depreciation. j. Variable selling and administrative expenses include supplies at 3% of sales. k. Capital expenditures include $50,000 for new manufacturing equipment, to be purchased and paid for in the first quarter. 1. Cash receipts for sales on account are 70% in the quarter of the sale and 30% in the quarter following the sale; Accounts Receivable balance on December 31, 2018, is expected to be received in the first quarter of 2019; uncollectible accounts are considered insignificant and not considered for budgeting purposes. m. Direct materials purchases are paid 80% in the quarter purchased and 20% in the following quarter; Accounts Payable balance on December 31, 2018, is expected to be paid in the first quarter of 2019. n. Direct labor, manufacturing overhead, and selling and administrative costs are paid in the quarter incurred. o. Income tax expense is projected at $4,500 per quarter and is paid in the quarter incurred. p. Tamison desires to maintain a minimum cash balance of $20,000 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 8% per year and paid at the beginning of the quarter based on the amount outstanding from the previous quarter.