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4J2SI'2019 More Info (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. b. c. 'F Budgeted sales are 1 ,800 tires for the rst quarter and expected to increase by 100 tires per quarter. Cash sales are expected to be 30% of total sales, with the remaining 70% of sales on account. Finished Goods Inventory on December 31, 2018 consists of 600 tires at $30 each. Desired ending Finished Goods Inventory is 20% of the next quarter's sales; rst quarter sales for 2020 are expected be 2,200 tires. FIFO inventory costing method is used. Raw Materials Inventory on December 31, 2018, consists of 1,200 pounds of rubber compound used to manufacture the res. Direct materials requirements are 2 pounds of a rubber compound per tire. The cost of the compound is $4.00 per pound. 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 1,200 pounds; indirect materials are insignicant and not considered for budgeting purposes. Each tire requires 0.60 hours of direct labor; direct labor costs average $16 per hour. Variable manufacturing overhead is $1 per tire. Fixed manufacturing overhead includes $3,500 per quarter in depreciation and $46,160 per quarter for other costs, such as utilities, insurance, and property taxes. Fixed selling and administrative expenses include $12,500 per quarter for salaries; $1,800 per quarter for rent; $1,500 per quarter for insurance; and $1,000 per quarter for depreciation. Variable selling and administrative expenses include supplies at 2% of sales. Capital expenditures include $30,000 for new manufacturing equipment, to be purchased and paid in the rst quarter. . Cash receipts for sales on acCOunt are 60% in the quarter of the sale and 40% in the quarter following the sale; December 31, 201B, Accounts Receivable is received in the rst quarter of 2019; uncollectible accounts are considered insignicant and not considered for budgeting purposes. Direct materials purchases are paid 70% in the quarter purchased and 30% in the following quarter; December 31, 2018, Accounts Payable is paid in the rst quarter of 2019. Direct labor, manufacturing overhead, and selling and administrative costs are paid in the quarter incurred. Income tax expense is projected at $2,500 per quarter and is paid in the quarter incurred. Gn'dley desires to maintain a minimum cash balance of $45,000 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 6% per year and paid at the beginning of the quarter based on the amount outstanding from the previous quarter. 4123/2019 Data Table* Gridley Tire Company Balance Sheet December 31 , 2018 Assets Current Assets :" Cash 50 , 000 Accounts Receivable* 35 , 000 Raw Materials Inventory 4 , 800 Finished Goods Inventory 18 , 000 Total Current Assets 107, 800 Property , Plant , and Equipment :" Equipment 142, 000 Less : Accumulated Depreciation ( 83, 000 ) 59, 000 Total Assets 166, 800 Liabilities Current Liabilities :" Accounts Payable 14 , 000 Stockholders' Equity Common Stock , no par $ 130 , 000 Retained Earnings 22, 800 Total Stockholders ' Equity 152, 800 Total Liabilities and Stockholders ' Equity* 166, 800Supplies Expense L Total budgeted selling and administrative expense First Quarter Second Quarter Third Fourth Quarter Quarter
