U Balance Corporation manufactures balance bikes for toddlers.

Each bike requires 2 tires at a cost of $4.00 per tire, 0.5 direct labor hours and 3 machine hours. Production line works are paid $13.00 per hour. The company has estimated total manufacturing overhead of $400,000 for the year and allocates overhead on the basis of machine hours. Estimated machine hours total 80,000 for the period. The company records $5,000 in depreciation expense each month.

Production peaks in November as the company prepares for the gift giving season that occurs in December. The company has planned to produce the following units for the last four months of the year and January of the next year:

September	1,300
October	1,500
November	3,000
December	2,000
January	500

Desired ending inventory of the tires used on the balance bikes is 25% of the next month's production needs.

1. Create a direct materials budget for the third quarter of the year for tires used on the balance bikes. At the bottom of the budget, indicate the total cost to purchase the tires.

2. Create a direct labor budget for the third quarter of the year.

3. Calculate the predetermined overhead rate for manufacturing overhead.

4. Prepare a manufacturing overhead budget for the third quarter of the year.