The Gessing Tire Company manufactures racing tires for bicycles. Gessing sells tires for $70 each. Gessing is planning for the next year by developing a master budget by quarters. Gessing's balance sheet for December 31, 2018, follows: 3(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. Review the direct materials budget you prepared above. Review the direct labor budget you prepared above. Review the manufacturing overhead budget you prepared above. Review the selling and administrative expense budget you prepared above. Cash Payments Fourth First Quarter Second Quarter Third Quarter Quarter Total Total direct materials purchases First | Third Fourth Second Quarter Quarter Quarter Quarter Total Cash Payments Direct Materials: Accounts Payable balance, December 31, 2018 1st Qtr.-Qtr. 1 direct material purchases paid in Qtr. 1 1st Qtr. Qtr. 1 direct material purchases paid in Qtr. 2 2nd Qtr.Qtr. 2 direct material purchases paid in Qtr. 2 2nd Qtr.Qtr. 2 direct material purchases paid in Qtr. 3 3rd Qtr. -Qtr. 3 direct material purchases paid in Qtr. 3 3rd Qtr. Qtr. 3 direct material purchases paid in Qtr. 4 4th Qtr.Qtr. 4 direct material purchases paid in Qtr. 4 Total payments for direct materials Direct Labor: Total payments for direct labor 0 Reference 0 Reference Gessing Tire Company Direct Materials Budget For the Year Ended December 31, 2019 First Second Quarter Quarter Third Fourth Quarter Quarter Total 1,840 1,720 1,920 1,820 7,300 Fourth Quarter Gessing Tire Company Direct Labor Budget For the Year Ended December 31, 2019 First Second Third Quarter Quarter Quarter Budgeted tires to be produced 1,840 1,720 1,820 0.40 0.40 0.40 Direct labor hours per unit Direct labor hours needed for production Total 3,680 3,440 1,092 3,640 1,152 1,032 3,840 200 14,600 200 1,920 0.40 7,300 0.40 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 14,800 2,920 4,712 200 4,792 1,092 4,040 1,152 200 Direct labor cost per hour 8||$ 4,532 1,032 3,500 4.00 $ 14,000 $ 5,888 5,504S 5,824 6,144 S 23,360 4,512 4.00 $ 18,048$ Budgeted direct labor cost 3,700 4.00 $ 14,800 $ 2,888 4.00 $ 11,552 $ 14,600 4.00 Print Done Gessing Tire Company Manufacturing Overhead Budget For the Year Ended December 31, 2019 First Second Third Quarter Quarter Quarter Fourth Quarter 1,920 Total Budgeted tires to be produced 1,840 1,720 1,820 7,300 Total VOH cost per tire Budgeted VOH Budgeted FOH 5,520 $ 5,160 $ 5,460 $ 5,760 $ 21,900 Gessing Tire Company Selling and Administrative Expense Budget For the Year Ended December 31, 2019 First Second Third Fourth Quarter | Quarter | Quarter Quarter Salaries Expense 11,000 $ 11,000 11,000 S 11,000$ Rent Expense 5,100 5,100 5,100 Insurance Expense 900 900 Depreciation Expense 2,000 2,000 2,000 2,000 Supplies Expense 3,360 3,570 3,780 3,990 $ 22,360 $ 22,570 $ 22,780 $ 22,990 S Total budgeted selling and administrative expense 5,100 Depreciation 900 900 22,000 102,100 5,500 25,525 31,025 36,545 $ Utilities, insurance, property taxes 5,500 25,525 31,025 36,185 $ 5,500 25,525 31,025 36,485 $ 44,000 20,400 3,600 8,000 14,700 90,700 5,500 25,525 31,025 36,785 $ Total budgeted FOH 124,100 146,000 Budgeted manufacturing overhead costs 36 688 728 768 Print Done Direct labor hours Budgeted manufacturing overhead costs Predetermined overhead allocation rate $ 2,920 146,000 50 1 Deld Idule Gessing Tire Company Balance Sheet December 31, 2018 Assets 55,000 25,000 800 Current Assets Cash Accounts Receivable Raw Materials Inventory Finished Goods Inventory Total Current Assets Property, Plant, and Equipment: Equipment Less: Accumulated Depreciation 2,500 83,300 (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. Budgeted sales are 1.600 tires for the first 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. b. Finished Goods Inventory on December 31, 2018 consists of 100 tires at $25 each c. Desired ending Finished Goods Inventory is 20% of the next quarter's sales, first quarter sales for 2020 are expected be 2,000 tires. FIFO inventory costing method is used. d. Raw Materials Inventory on December 31, 2018, consists of 200 pounds of rubber compound used to manufacture the tires. e. Direct materials requirements are 2 pounds of a rubber compound per tire. The cost of the compound is $4.00 per pound. f. Desired ending Raw Materials Inventory is 30% 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. g. Each tire requires 0.40 hours of direct labor, direct labor costs average $8 per hour. h. Variable manufacturing overhead is $3 per tire. i. Fixed manufacturing overhead includes $5,500 per quarter in depreciation and $25,525 per quarter for other costs, such as utilities, insurance, and property taxes. j. Fixed selling and administrative expenses include $11,000 per quarter for salaries: $5,100 per quarter for rent; $900 per quarter for insurance, and $2,000 per quarter for depreciation. k. Variable selling and administrative expenses include supplies at 3% of sales. I. 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, 2018, Accounts Receivable is received in the first quarter of 2019, uncollectible accounts are considered insignificant and not considered for budgeting purposes. Direct materials purchases are paid 60% in the quarter purchased and 40% in the following quarter, December 31, 2018, Accounts Payable is paid in the first quarter of 2019 o. Direct labor, manufacturing overhead, and selling and administrative costs are paid in the quarter incurred. p. Income tax expense is projected at $4,000 per quarter and is paid in the quarter incurred. q. 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 12% per year and paid at the beginning of the quarter based on the amount outstanding from the previous quarter. 183,000 (106,000) 77,000 160,300 Total Assets Liabilities Current Liabilities: Accounts Payable $ 14,000 Stockholders' Equity $ Common Stock, no par Retained Earnings 140,000 6,300 Total Stockholders' Equity 146,300 160,300 Total Liabilities and Stockholders' Equity