The Gessing Tire Company manufactures racing tires for bicycles. Gessing sells tires for $65 each. Gessing is planning for the next year by developing a master budget by quarters. Gessing's balance sheet for December 31, 2018, follows: E: (Click the icon to view the balance sheet.) Other data for Gessing Tire Company: (Click the icon to view the other data.) Read the requirements 5,400 10,800 Requirement 1. Prepare Gessing'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. - X x More Info Data Table Gessing Tire Company Sales Budget For the Year Ended December 31, 2019 (Unless otherwise noted, assume all of the following events occurred during 2018 and that any balances given Gessing Tire Company are stated as of December 31, 2018.) First Second Third Fourth Balance Sheet a. Budgeted sales are 1,600 tires for the first quarter and expected to increase by 100 tires per quarter. Cash Quarter Quarter Quarter Quarter Total sales are expected to be 20% of total sales, with the remaining 80% of sales on account. December 31, 2018 b. Finished Goods Inventory on December 31, 2018 consists of 300 tires at $36 each. Budgeted tires to be sold Assets c. Desired ending Finished Goods Inventory is 50% of the next quarter's sales; first quarter sales for 2020 Sales price per unit Current Assets are expected be 2,000 tires. FIFO inventory costing method is used. d. Raw Materials Inventory on December 31, 2018, consists of 600 pounds of rubber compound used to Cash $ Total sales 38,000 manufacture the tires. Accounts Receivable 40,000 e. Direct materials requirements are 2 pounds of a rubber compound per tire. The cost of the compound is $9.00 per pound. Raw Materials Inventory Requirements f. Desired ending Raw Materials Inventory is 10% of the next quarter's direct materials needed for Finished Goods Inventory production; desired ending inventory for December 31, 2019 is 600 pounds; indirect materials are insignificant and not considered for budgeting purposes. Total Current Assets $ 94,200 g. Each tire requires 0.40 hours of direct labor, direct labor costs average $8 per hour. 1. Prepare Gessing's operating budget and cash budget for 2019 by quarter. Property, Plant, and Equipment: h. Variable manufacturing overhead is $4 per tire. Required schedules and budgets include: sales budget, production budget, Equipment 183,000 direct materials budget, direct labor budget, manufacturing overhead budget, i. Fixed manufacturing overhead includes $4,500 per quarter in depreciation and $22,450 per quarter for cost of goods sold budget, selling and administrative expense budget, (50,000) Less: Accumulated Depreciation other costs, such as utilities, insurance, and property taxes. 133,000 schedule of cash receipts, schedule of cash payments, and cash budget. j. Fixed selling and administrative expenses include $12,000 per quarter for salaries; $1,500 per quarter for $ Manufacturing overhead costs are allocated based on direct labor hours. 227,200 Total Assets rent; $1,650 per quarter for insurance; and $1,500 per quarter for depreciation. Round all calculations to the nearest dollar. k. Variable selling and administrative expenses include supplies at 3% of sales Liabilities 2. Prepare Gessing's annual financial budget for 2019, including budgeted 1. Capital expenditures include $40,000 for new manufacturing equipment, to be purchased and paid in the income statement and budgeted balance sheet. Current Liabilities: first quarter. Accounts Payable $ 11,000 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, 2018, Accounts Receivable is received in the first quarter of 2019, uncollectible Print Done Stockholders' Equity accounts are considered insignificant and not considered for budgeting purposes. Common Stock, no par $ 125,000 n. Direct materials purchases are paid 60% in the quarter purchased and 40% in the following quarter, Enter any number in the edit fields and then click Check Answer. December 31, 2018, Accounts Payable is paid in the first quarter of 2019. 91,200 Retained Earnings 0. Direct labor, manufacturing overhead, and selling and administrative costs are paid in the quarter incurred. Total Stockholders' Equity 216,200 p. Income tax expense is projected at $2,500 per quarter and is paid in the quarter incurred. parts $ 227,200 Total Liabilities and Stockholders' Equity q. Gessing desires to maintain a minimum cash balance of $35,000 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 5% per year and paid at the beginning of the quarter based on the amount outstanding from the previous quarter