The Grady Tire Company manufactures racing tires for bicycles. Grady sells tires for $70 each. Grady is planning for the next year by developing a master budget by quarters. Grady's balance sheet for December 31, 2024. follows: (Click the icon to view the balance sheet.) Other data for Grady Tire Company: (Click the icon to view the other data.) Read the requirements. Prepare the production budget. Review the sales budget you prepared above. \begin{tabular}{|c|c|c|c|c|} \hline \multicolumn{5}{|c|}{\begin{tabular}{c} Grady Tire Company \\ Balance Sheet \\ December 31,2024 \end{tabular}} \\ \hline \multicolumn{5}{|c|}{ Assets } \\ \hline \multicolumn{5}{|l|}{ Current Assets: } \\ \hline Cash & $ & 55,000 & \multirow{2}{*}{\multicolumn{2}{|c|}{4}} \\ \hline Accounts Receivable & & 32,000 & & \\ \hline - Raw Materials Inventory & & 3,000 & & \\ \hline Finished Goods Inventory & & 7,200 & & \\ \hline Total Current Assets & & & $ & 97,200 \\ \hline \multicolumn{5}{|l|}{ Property, Plant, and Equipment: } \\ \hline Equipment & & 150,000 & & \\ \hline Less: Accumulated Depreciation & & (77,000) & & 73,000 \\ \hline Total Assets & & & $ & 170,200 \\ \hline \end{tabular} Liabilities Current Liabilities: Accounts Payable Stockholders' Equity (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 1,800 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. b. Finished Goods Inventory on December 31,2024 consists of 300 tires at $24 each. c. Desired ending Finished Goods Inventory is 20% of the next quarter's sales; first quarter sales for 2026 are expected be 2,200 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 $5.00 per pound. f. Desired ending Raw Materials Inventory is 20% 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 0.60 hours of direct labor; direct labor costs average $25 per hour. h. Variable manufacturing overhead is $5 per tire. i. Fixed manufacturing overhead includes $5,500 per quarter in depreciation and $13,159 per quarter for other costs, such as utilities, insurance, and property taxes. j. Fixed selling and administrative expenses include $13,000 per quarter for salaries; $1,800 per quarter for rent; $1,350 per quarter for insurance; and $2,000 per quarter for depreciation. k. Variable selling and administrative expenses include supplies at 2% of sales
