The Gavin Tire Company manufactures racing tires for bicycles. Gavin sells tires for S70 Other data for Gavin Tire Company each. Gavin is planning for the next year by developing a master budget by quarters. (Click the icon to view the other data.) Gavin's balance sheet for December 31, 2024 follows: (Click the icon to view the balance sheet.) Read the requirements S $ Requirement 1. Prepare Gavin's operating budget and cash budget for 2025 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. Gavin Tire Company Sales Budget For the Year Ended December 31, 2025 First Second Third Fourth Quarter Quarter Quarter Quarter Total Budgeted tires to be sold 1.100 1,300 1,500 1,700 5,600 70 S 70 70 $ Sales price per unit 70 70 $ Total sales $ 77,000 $ 91,000 $ 105,000 $ 119,000 $392,000 Prepare the production budget. Review the sales budget you prepared above. Gavin Tire Company Production Budget For the Year Ended December 31, 2025 First Second Third Fourth Quarter Quarter Quarter Quarter Total Budgeted tires to be sold 1100 1300 1500 1700 5600 Plus: Desired tires in ending inventory Total tires needed Less: Tires in beginning inventory Budgeted tires to be produced Choose from any list or enter any number in the input fields and then click Check Answer. D. 17 parts Clear All remaining Final Check Data Table - X $ 6,000 103,500 Gavin Tire Company Balance Sheet December 31, 2024 Assets Current Assets Cash 48,000 Accounts Receivable 35,000 Raw Materials Inventory Finished Goods Inventory 14,500 Total Current Assets Property, Plant, and Equipment: Equipment 177,000 Less: Accumulated Depreciation (55,000) $ Total Assets Liabilities Current Liabilities: Accounts Payable Stockholders' Equity Common Stock, no par $ 140,000 Retained Earnings 79,500 Total Stockholders' Equity $ Total Liabilities and Stockholders' Equity 122,000 225,500 $ 6,000 219,500 225,500 Print Done More Info (Unless otherwise noted, assume all of the following events occurred during 2024 and that any balances given are stated as of December 31, 2024.) a. Budgeted sales are 1,100 tires for the first quarter and expected to increase by 200 tires per quarter. Cash sales are expected to be 10% of total sales, with the remaining 90% of sales on account. b. Finished Goods Inventory on December 31, 2024 consists of 500 tires at $29 each. c. Desired ending Finished Goods Inventory is 20% of the next quarter's sales; first quarter sales for 2026 are expected be 1,900 tires. FIFO inventory costing method is used. d. Raw Materials Inventory on December 31, 2024, consists of 1,000 pounds of rubber compound used to manufacture the tires. e Direct materials requirements are two pounds of a rubber compound per tire. The cost of the compound is $6.00 per pound. f. Desired ending Raw Materials Inventory is 10% of the next quarter's direct materials needed for production, desired ending inventory for December 31, 2025 is 1,000 pounds, indirect materials are insignificant and not considered for budgeting purposes. g. Each tire requires 0.30 hours of direct labor, direct labor costs average $25 per hour. h. Variable manufacturing overhead is $2 per tire. i. Fixed manufacturing overhead includes $4,500 per quarter in depreciation and $3,035 per quarter for other costs, such as utilities, insurance, and property taxes. 1. Fixed selling and administrative expenses include $12,000 per quarter for salaries: $4,800 per quarter for rent; $1,200 per quarter for insurance; and $1,000 per quarter for depreciation. k. Variable selling and administrative expenses include supplies at 3% of sales. 1 Capital expenditures include $20,000 for new manufacturing equipment to be purchased and paid in the first quarter m. Cash receipts for sales on account are 70% in the quarter of the sale and 30% in the quarter following the sale; December 31, 2024, Accounts Receivable is received in the first quarter of 2025; uncollectible accounts are considered insignificant and not considered for budgeting purposes n. Direct materials purchases are paid 90% in the quarter purchased and 10% in the following quarter; December 31, 2024, Accounts Payable is paid in the first quarter of 2025. 0. Direct labor, manufacturing overhead, and selling and administrative costs are paid in the quarter incurred. p. Income tax expense is projected at $3,000 per quarter and is paid in the quarter incurred. 9. Gavin 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 S1,000; interest is 4% per year and paid at the beginning of the quarter based on the amount outstanding from the previous quarter. Print Done Requirements - X 1. Prepare Gavin's operating budget and cash budget for 2025 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. 2. Prepare Gavin's annual financial budget for 2025, including budgeted income statement and budgeted balance sheet. Print Done