The Gridley Tire Company manufactures racing tires for bicycles. Gridley sells tires for $65 each. Gridley is planning for the next year by developing a master budget by quarters. Gridley's balance sheet for December 31, 2018, follows: (Click the icon to view the balance sheet.) Other data for Gr (Click the ico Read the require Review the production budget you prepared above. Gridley Tire Company Direct Materials Budget For the Year Ended December 31, 2019 First Second Third Fourth Quarter Quarter Quarter Quarter Total Direct materials per tire Direct materials needed for production Plus: Total direct materials needed Less: Budgeted purchases of direct materials Direct materials cost per pound Budgeted cost of direct materials Data Table * More Info Gridley Tire Company Balance Sheet December 31, 2018 Assets Current Assets: Cash $ Accounts Receivable Raw Materials Inventory 74.000 25,000 3,200 5,800 (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 1,300 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 200 tires at $29 each. C. Desired ending Finished Goods Inventory is 50% of the next quarter's sales; first quarter sales for 2020 are expected be 1,700 tires, FIFO inventory costing method is used. d. Raw Materials Inventory on December 31, 2018, consists of 400 pounds of rubber compound used to manufacture the tires. 0. Direct materials requirements are 2 pounds of a rubber compound per tire. The cost of the compound is $8.00 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, 2019 is 400 pounds; indirect materials are insignificant and not considered for budgeting purposes. g. Each tire requires 0.20 hours of direct labor; direct labor costs average $10 per hour. h. Variable manufacturing overhead is $4 per tire. i. Fixed manufacturing overhead includes $2,500 per quarter in depreciation and $7,175 per quarter for other costs, such as utilities, insurance, and property taxes. 1. Fixed selling and administrative expenses include $12,500 per quarter for salaries: $1,800 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 2% of sales. I. Capital expenditures include $40,000 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 S Finished Goods Inventory Total Current Assets Property, Plant, and Equipment: Equipment 108,000 Less: Accumulated Depreciation 155,000 (68,000) $ 87,000 Total Assets 195,000 Liabilities Current Liabilities: Accounts Payable $ 14,000 Print Done Print Done Clear All Check
