The Gessing Tire Company manufactures racing tires for bicycles. Gessing sells tires for $85 each. Gessing is planning for the next year by developing a master budget by quarters. Gessings balance sheet for December 31, 2018, follows:

Gessing Tire Company| Balance sheet |December 31, 2018

Current Assets:

Cash $ 52,000

Accounts Receivable 35,000

Raw Materials Inventory 1,900

Finished Goods Inventory 2,400

________

Total Current Assets $ 91,300

Property, Plant, and Equipment:

Equipment 142,000

Less: Accumulated Depreciation (50,000) 92,000

_________ ________

Total Assets $ 183,300

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Liabilities

Current Liabilities:

Accounts Payable $10,000

Stockholders Equity

Common Stock, no par $ 110,000

Retained Earnings 63,300

_________

Total Stockholders Equity 173,300

_______

Total Liabilities and Stockholders Equity $ 183,300

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Other data for Gessing Tire Company:

1. Budgeted sales are 1,000 tires for the first quarter and expected to increase by 100 tires per quarter. Cash sales are expected to be 20% of total sales, with the remaining 80% of sales on account.
2. Finished Goods Inventory on December 31, 2018 consists of 100 tires at $24 each.
3. Desired ending Finished Goods Inventory is 50% of the next quarter's sales; first quarter sales for 2020 are expected be 1,400 tires. FIFO inventory costing method is used.
4. Raw Materials Inventory on December 31, 2018, consists of 200 pounds of rubber compound used to manufacture the tires.
5. Direct materials requirements are 2 pounds of a rubber compound per tire. The cost of the compound is $9.50 per pound.
6. 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 200 pounds; indirect materials are insignificant and not considered for budgeting purposes.
7. Each tire requires 0.60 hours of direct labor; direct labor costs average $16 per hour.
8. Variable manufacturing overhead is $2 per tire.
9. Fixed manufacturing overhead includes $3,500 per quarter in depreciation and $28,220 per quarter for other costs, such as utilities, insurance, and property taxes.
10. Fixed selling and administrative expenses include $8,000 per quarter for salaries; $5,700 per quarter for rent; $1,650 per quarter for insurance; and $1,000 per quarter for depreciation.
11. Variable selling and administrative expenses include supplies at 1% of sales
12. Capital expenditures include $35,000 for new manufacturing equipment, to be purchased and paid in the first quarter.
13. Cash receipts for sales on account are 80% in the quarter of sale and 20% in the quarter following the sale; December 31, 2018, Accounts receivable is received in the first quarter of 2019, uncollectible accounts are considered insignificant not considered for budgeting purposes.
14. Direct materials purchases are paid 80% in the quarter of the sale and 20% in the following quarter; December 31, 2018, Accounts payable is paid in the first quarter of 2019.
15. Direct labor, manufacturing overhead, and selling and administrative costs are paid in the quarter incurred.
16. Income tax expense is projected at $3,000 per quarter and is paid in the quarter incurred.
17. Gessing desires to maintain a minimum cash balance of $50,000 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.

Read the requirments:

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.
2. Prepare Gessing's annual financial budget for 2019, including budgeted income statement and budgeted balance sheet.

Prepare sales budget:

Gessing Tire Company |Sales Budget |For the Year ended December 31, 2019

1^st Quarter|2nd quarter| 3^rd quarter|4th quarter|Total

Budgeted tires to be sold

Sales Price per unit $ 85 85 85 85 85

Total Sales $

Prepare production budget:

Gessing Tire Company

Production budget

For the year ended in December 31, 2019

1^st quarter | 2^nd quarter | 3^rd quarter | 4^th quarter | Total

Budgeted tires to be sold

Plus: Desired tires in

Ending inventory

Total tired needed

Less: Tires in beginning inventory

Budgeted tires to be produced

Prepare the direct materials budget.

Gessing Tire Company

Direct materials budget

For the year ended December 31, 2019

1st quarter | 2^nd quarter | 3^rd quarter | 4^th quarter | total

Budgeted tires to be produced

Direct materials per tire

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

Prepare direct labor budget.

Tire Company

Direct Labor Budget

For the year ended December 2019

1^st quarter | 2^nd quarter | 3^rd quarter | 4^th quarter | Total

Budgeted tires to be produced

Direct labor hours per unit

Direct labor hours needed

For production

Direct labor cost per hour

Budgeted tires to be produced

Direct labor hours per unit

Direct labor hours needed for production

Direct labor cost per hour

Budgeted direct labor cost

Prepare manufacturing overhead budget.

Review production budget you prepared above

Review direct labor budget you prepared above

Tire Company

Manufacturing Overhead Budget

For the year ended December 31, 2019

1^st quarter | 2^nd quarter | 3^rd quarter | 4^th quarter | total

Budgeted tires to be produced

OH cost per tire

Budgeted VOH

Budgeted FOH

Deprecation

Utilities, insurance, property taxes

Total budgeted FOH

Budgeted manufacturing overhead costs

Direct labor hours

Budgeted manufacturing overhead costs

predetermined overhead allocation rate

Before preparing the costs of goods sold budget, calculate the projected manufacturing cost per tire for 2019.

Direct materials cost per tire

Direct labor cost per tire

Manufacturing overhead cost per tire

Total projected manufacturing cost per tire for 2019

Now prepare the cost of goods sold budget.

Cost of goods sold budget

For the year ended December 31, 2019

1^st quarter | 2^nd quarter | 3^rd quarter | 4^th quarter| total

Beginning inventory

Tires produced and sold in 2019

Total budgeted costs of goods sold

Prepare the selling and administrative expense budget.

Selling and Administrative Expense Budget

For the year ended December 31, 2019

1^st quarter | 2^nd quarter | 3^rd quarter | 4^th quarter | total

Salaries expense

Rent expense

Insurance expense

Depreciation expense

Supplies expense

Total budgeted selling and

Administrative expense $