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The Gerard Tire Company manufactures racing tires for bicycles. Gerard sells tires for $90 each. Gerard is planning for the next year by developing a

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The Gerard Tire Company manufactures racing tires for bicycles. Gerard sells tires for $90 each. Gerard is planning for the next year by developing a master budget by quarters. Gerard's balance sheet for December 31, 2024, follows: (Click the icon to view the balance sheet.) Other data for Gerard Tire Company: A (Click the icon to view the other data.) Read the requirements. Requirement 1. Prepare Gerard'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. Gerard Tire Company Sales Budget For the Year Ended December 31, 2025 First Second Third Fourth Quarter Quarter Quarter Quarter 1,500 1,700 1,900 2,100 $ 90 $ 90 $ 90 $ 90 $ Budgeted tires to be sold Sales price per unit Total 7,200 90 Total sales $ 135,000 $ 153,000 $ 171,000 $ 189,000 $ 648,000 Prepare the production budget. Review the sales budget you prepared above. Gerard Tire Company Production Budget For the Year Ended December 31, 2025 Second Third Quarter Quarter Quarter First Fourth Quarter Total Plus: Total tires needed Less: Budgeted tires to be produced More info ata table Gerard Tire Company Balance Sheet December 31, 2024 Assets Current Assets: Cash $ 56.000 20.000 Accounts Receivable Raw Materials Inventory 5,100 9,900 Finished Goods Inventory $ 91,000 Total Current Assets Property, Plant, and Equipment: Equipment 194,000 (42,000) Less: Accumulated Depreciation 152,000 (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 1,500 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 300 tires at $33 each. C Desired ending Finished Goods inventory is 30% of the next quarter's sales, first quarter sales for 2026 are expected be 2,300 tires. FIFO inventory costing method is used. d. Raw Materials Inventory on December 31, 2024, consists of 600 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 $8.50 per pound. f Desired ending Raw Materials Inventory is 40% of the next quarter's direct materials needed for production: desired ending inventory for December 31, 2025 is 600 pounds; indirect materials are insignificant and not considered for budgeting purposes. g. Each tire requires 0.40 hours of direct labor, direct labor costs average $12 per hour. h. Variable manufacturing overhead is $4 per tire. i. Fixed manufacturing overhead includes $6,000 per quarter in depreciation and $16,770 per quarter for other costs, such as utilities, insurance, and property taxes. 1. Fixed selling and administrative expenses include $12,500 per quarter for salaries; $3,000 per quarter for rent; $450 per quarter for insurance, and $2,000 per quarter for depreciation. k Variable selling and administrative expenses include supplies at 2% of sales. 1. Capital expenditures include $15,000 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 60% in the quarter purchased and 40% 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 $1,500 per quarter and is paid in the quarter incurred. a. Gerard desires to maintain a minimum cash balance of $55,000 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. S Total Assets 243,000 Liabilities Current Liabilities: : Accounts Payable S 8,000 Stockholders' Equity Common Stock, no par $ 120,000 115.000 Retained Earnings Total Stockholders' Equity 235,000 Total Liabilities and Stockholders' Equity S S 243,000 Print Done Print Done

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