The Grayson Tire Company manufactures racing tires for bicycles. Grayson sells tires for $70 each. Grayson is planning for the next year by developing a master budget by quarters. Grayson's balance sheet for December 31, 2024, follows: (Click the icon to view the balance sheet.) Other data for Grayson Tire Company: (Click the icon to view the other data.) Read the requirements. Requirement 1. Prepare Grayson'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. (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 1,200 tires for the first quarter and expected to increase by 150 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 400 tires at $29 each. c. Desired ending Finished Goods Inventory is 20% of the next quarter's sales; first quarter sales for 2026 are expected be 1,800 tires. FIFO inventory costing method is used. d. Raw Materials Inventory on December 31, 2024, consists of 800 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 $6.00 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 800 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 $8 per hour. h. Variable manufacturing overhead is $3 per tire. i. Fixed manufacturing overhead includes $4,000 per quarter in depreciation and $8,735 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; $3,600 per quarter for rent; $1,350 per quarter for insurance; and $1,500 per quarter for depreciation. k. Variable selling and administrative expenses include supplies at 3% of sales. h. Variable manufacturing overhead is $3 per tire. i. Fixed manufacturing overhead includes $4,000 per quarter in depreciation and $8,735 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; $3,600 per quarter for rent; $1,350 per quarter for insurance; and $1,500 per quarter for depreciation. k. Variable selling and administrative expenses include supplies at 3% of sales. I. Capital expenditures include $25,000 for new manufacturing equipment, to be purchased and paid in the first quarter. m. Cash receipts for sales on account are 85% in the quarter of the sale and 15% 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 50% in the quarter purchased and 50% in the following quarter; December 31, 2024, Accounts Payable is paid in the first quarter of 2025. 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. Grayson desires to maintain a minimum cash balance of $45,000 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 4% per year and paid at the beginning of the quarter based on the amount outstanding from the previous quarter. Data table Data table Review the sales budget you prepared above. Prepare the direct labor budget. (Enter any hours per unit amounts to two decimal places, X. XX, and round all other amounts to the nearest whole number.) Review the production budget you prepared above. Prepare the manufacturing overhead budget. (Abbreviations used: VOH = variable manufacturing overhead; FOH = fixed manufacturing overhead.) Prepare the selling and administrative expense budget. Review the sales budget you prepared above. Prepare the selling and administrative expense budget. Review the sales budget you prepared above. Prepare the cash receipts budget. (If a box is not used in the table leave the box empty; do not enter a zero.) Review the sales budget you prepared above. Prepare the cash receipts budget. (If a box is not used in the table leave the box empty; do not enter a zero.) Review the sales budget you prepared above. Prepare the cash payments budget. (Round all amounts you entered into the budget to the nearest whole dollar. If a box is not used in the table leave the box empty; do not enter a zero.) 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. financing with a minus sign or parentheses.) Review the cash receipts budget you prepared above. Review the cash payments budget you prepared above. Ending cash balance before fi nancing Minimum cash balance desired Projected cash excess (de ciency) Financing: Borrowing Principal repayments Total effects of financing Ending cash balance Requirement 2. Prepare Grayson's annual financial budget for 2019 , including budgeted income statement, budgeted balance sheet, and budgeted statement of cash flows. Begin with the budgeted income statement. (Complete all input boxes. Enter a "0" for any zero balances.) Review the sales budget you prepared above. Review the cost of goods sold budget you prepared above. Review the selling and administrative expense budget you prepared above. Review the cash budget you prepared above. Prepare the budgeted balance sheet. (Round to the nearest whole dollar.) Review the production budget you prepared above. Review the direct materials budget you prepared above. Review the selling and administrative expense budget you prepared above. Review the cash receipts budget you prepared above. Review the cash payments budget you prepared above. Review the cash budget you prepared above. Review the income statement you prepared above. Grayson Tire Company Budgeted Balance Sheet December 31, 2019 Assets Current Assets: Cash Accounts Receivable Raw Materials Inventory Finished Goods Inventory Total Current Assets Property, Plant, and Equipment: Equipment Less: Accumulated Depreciation Total Assets Liabilities Current Liabilities: Accounts Payable Liabilities Stockholders' Equity Common Stock, no par Retained Earnings Total Stockholders' Equity Total Liabilities and Stockholders' Equity The Grayson Tire Company manufactures racing tires for bicycles. Grayson sells tires for $70 each. Grayson is planning for the next year by developing a master budget by quarters. Grayson's balance sheet for December 31, 2024, follows: (Click the icon to view the balance sheet.) Other data for Grayson Tire Company: (Click the icon to view the other data.) Read the requirements. Requirement 1. Prepare Grayson'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. (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 1,200 tires for the first quarter and expected to increase by 150 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 400 tires at $29 each. c. Desired ending Finished Goods Inventory is 20% of the next quarter's sales; first quarter sales for 2026 are expected be 1,800 tires. FIFO inventory costing method is used. d. Raw Materials Inventory on December 31, 2024, consists of 800 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 $6.00 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 800 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 $8 per hour. h. Variable manufacturing overhead is $3 per tire. i. Fixed manufacturing overhead includes $4,000 per quarter in depreciation and $8,735 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; $3,600 per quarter for rent; $1,350 per quarter for insurance; and $1,500 per quarter for depreciation. k. Variable selling and administrative expenses include supplies at 3% of sales. h. Variable manufacturing overhead is $3 per tire. i. Fixed manufacturing overhead includes $4,000 per quarter in depreciation and $8,735 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; $3,600 per quarter for rent; $1,350 per quarter for insurance; and $1,500 per quarter for depreciation. k. Variable selling and administrative expenses include supplies at 3% of sales. I. Capital expenditures include $25,000 for new manufacturing equipment, to be purchased and paid in the first quarter. m. Cash receipts for sales on account are 85% in the quarter of the sale and 15% 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 50% in the quarter purchased and 50% in the following quarter; December 31, 2024, Accounts Payable is paid in the first quarter of 2025. 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. Grayson desires to maintain a minimum cash balance of $45,000 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 4% per year and paid at the beginning of the quarter based on the amount outstanding from the previous quarter. Data table Data table Review the sales budget you prepared above. Prepare the direct labor budget. (Enter any hours per unit amounts to two decimal places, X. XX, and round all other amounts to the nearest whole number.) Review the production budget you prepared above. Prepare the manufacturing overhead budget. (Abbreviations used: VOH = variable manufacturing overhead; FOH = fixed manufacturing overhead.) Prepare the selling and administrative expense budget. Review the sales budget you prepared above. Prepare the selling and administrative expense budget. Review the sales budget you prepared above. Prepare the cash receipts budget. (If a box is not used in the table leave the box empty; do not enter a zero.) Review the sales budget you prepared above. Prepare the cash receipts budget. (If a box is not used in the table leave the box empty; do not enter a zero.) Review the sales budget you prepared above. Prepare the cash payments budget. (Round all amounts you entered into the budget to the nearest whole dollar. If a box is not used in the table leave the box empty; do not enter a zero.) 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. financing with a minus sign or parentheses.) Review the cash receipts budget you prepared above. Review the cash payments budget you prepared above. Ending cash balance before fi nancing Minimum cash balance desired Projected cash excess (de ciency) Financing: Borrowing Principal repayments Total effects of financing Ending cash balance Requirement 2. Prepare Grayson's annual financial budget for 2019 , including budgeted income statement, budgeted balance sheet, and budgeted statement of cash flows. Begin with the budgeted income statement. (Complete all input boxes. Enter a "0" for any zero balances.) Review the sales budget you prepared above. Review the cost of goods sold budget you prepared above. Review the selling and administrative expense budget you prepared above. Review the cash budget you prepared above. Prepare the budgeted balance sheet. (Round to the nearest whole dollar.) Review the production budget you prepared above. Review the direct materials budget you prepared above. Review the selling and administrative expense budget you prepared above. Review the cash receipts budget you prepared above. Review the cash payments budget you prepared above. Review the cash budget you prepared above. Review the income statement you prepared above. Grayson Tire Company Budgeted Balance Sheet December 31, 2019 Assets Current Assets: Cash Accounts Receivable Raw Materials Inventory Finished Goods Inventory Total Current Assets Property, Plant, and Equipment: Equipment Less: Accumulated Depreciation Total Assets Liabilities Current Liabilities: Accounts Payable Liabilities Stockholders' Equity Common Stock, no par Retained Earnings Total Stockholders' Equity Total Liabilities and Stockholders' Equity