(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 150 tires per quarter. Cash sales are expected to be 10% of total sales, with the remaining 90% of sales on account. b. Finished Goods Inventory on December 31, 2018 consists of 200 tires at $34 each. c. Desired ending Finished Goods Inventory is 40% of the next quarter's sales; first quarter sales for 2020 are expected be 2,200 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. e. Direct materials requirements are 2 pounds of a rubber compound per tire. The cost of the compound is $9.50 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 0.40 hours of direct labor; direct labor costs average $20 per hour. h. Variable manufacturing overhead is $1 per tire. i. Fixed manufacturing overhead includes $3,000 per quarter in depreciation and $14,157 per quarter for other costs, such as utilities, insurance, and property taxes. j. Fixed selling and administrative expenses include $14,000 per quarter for salaries; $3,600 per quarter for rent; $900 per quarter for insurance; and $1,000 per quarter for depreciation. k. Variable selling and administrative expenses include supplies at 3% of sales. I. Capital expenditures include $30,000 for new manufacturing equipment, to be purchased and paid in the first quarter. m. Cash receipts for sales on account are 60% in the quarter of the sale and 40% 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. n. Direct materials purchases are paid 80% in the quarter purchased and 20% 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 $3,500 per quarter and is paid in the quarter incurred. Giseppe desires to maintain a minimum cash balance of $70,000 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 6% per year and paid at the beginning of the quarter based on the amount outstanding from the previous quarter. Giseppe Tire Company Balance Sheet December 31, 2018 Assets Current Assets: Cash Accounts Receivable Raw Materials Inventory Finished Goods Inventory Total Current Assets Property, Plant, and Equipment: 70,000 25,000 3,800 6,800 $ 105,600 Equipment 183,000 (106,000) Less: Accumulated Depreciation 77,000 $ 182,600 Total Assets Liabilities Current Liabilities: Accounts Payable 15,000 Stockholders' Equity Stockholders' Equity $ Common Stock, no par 130,000 37,600 Retained Earnings Total Stockholders' Equity 167,600 $ 182,600 Total Liabilities and Stockholders' Equity Giseppe Tire Company Direct Materials Budget For the Year Ended December 31, 2019 First Second Third Fourth Quarter Quarter Quarter Quarter Total Budgeted tires to be produced 2,100 1,810 1,960 2,110 7,980 Direct materials per tire Direct materials needed for production 3,620 4,220 4,200 1,448 3,920 1,688 15,960 400 1,568 400 Plus: Desired direct materials in ending inventory Total direct materials needed 5,608 5,648 400 5,188 1,448 4,620 1,688 16,360 400 1,568 Less: Direct materials in beginning inventory Budgeted purchases of direct materials Direct materials cost per pound 5,248|| 9.50 $ 49,856 $ 3,740 9.50 $ 35,530||$ 4,040 9.50 $ 38,380 $ 2,932 9.50 $ 27,854 $ 15,960 9.50 151,620 | Budgeted cost of direct materials || Giseppe Tire Company Direct Labor Budget For the Year Ended December 31, 2019 First Second Third Fourth Quarter Quarter Quarter Quarter Total Budgeted tires to be produced 2,100 0.40 1,810 0.40 1,960 0.40 2,110 0.40 7,980 0.40 Direct labor hours per unit Direct labor hours needed for production 840|| 784 20 $ 724 20 14,480 $ Direct labor cost per hour 20||$ 16,800 $ 20 844|| $ 16,880 || $ 3,192 20 63,840 15,680 | $ Budgeted direct labor cost Giseppe Tire Company Manufacturing Overhead Budget For the Year Ended December 31, 2019 First Second Third Quarter Quarter Quarter Fourth Quarter Total Budgeted tires to be produced 2,110|| 7,980 2,100 1$ 1,810 1$ 1,960 1 $ $ 2,100 $ 1,810 $ 1,960|$ 2,110 $ 7,980 VOH cost per tire Budgeted VOH Budgeted FOH Depreciation 3,000 Utilities, insurance, property taxes 3,000 14,157 17,157 19,257 $ 3,000 14,157 17,157 19,117|$ 14,157 17,157 18,967|| $ 3,000 14,157 17,157 19,267 $ 12,000 56,628 68,628 76,608 Total budgeted FOH $ Budgeted manufacturing overhead costs 840|| 724 784 844 Direct labor hours Budgeted manufacturing overhead costs 3,192 76,608 $ - 24 Predetermined overhead allocation rate Fourth Quarter Total Giseppe Tire Company Selling and Administrative Expense Budget For the Year Ended December 31, 2019 First Second Third Quarter Quarter Quarter 14,000 $ 14,000 $ 14,000 $ 3,600 3,600 3,600 900 900 900 1,000 1,000 1,000 3,840 4,200 4,560 Salaries Expense Rent Expense Insurance Expense Depreciation Expense 14,000 $ 3,600 900 1,000 4,920 56,000 14,400 3,600 4,000 17,520 Supplies Expense 23,340 23,700 24,060||$ 24,420|| $ Total budgeted selling and administrative expense 95,520 Print Done Other data for Giseppe Tire Company: (Click the icon to view the other data.) The Giseppe Tire Company manufactures racing tires for bicycles. Giseppe sells tires for $80 each. Giseppe is planning for the next year by developing a master budget by quarters. Giseppe's balance sheet for December 31, 2018, follows: (Click the icon to view the balance sheet.) Read the requirements. Cash Receipts from Customers First Second Third Fourth Quarter Quarter Quarter Quarter Total Total sales $ 128,000 $ 140,000 $ 152,000 $ 164,000 $ 584,000 First Second Third Fourth Quarter Quarter Quarter Total Quarter Cash Receipts from Customers: Accounts Receivable balance, December 31, 2018 $ 25,000 1st Qtr.Cash sales 12,800 1st Qtr.Credit sales, collection of Qtr. 1 sales in Qtr. 1 || 69,120 1st Qtr.Credit sales, collection of Qtr. 1 sales in Qtr. 2 2nd Qtr.Cash sales 2nd Qtr.Credit sales, collection of Qtr. 2 sales in Qtr. $ 46,080 14,000 2 75,600 2nd Qtr.Credit sales, collection of Qtr. 2 sales in Qtr. $ 50,400 15,200 3rd Qtr.Cash sales 3rd Qtr.Credit sales, collection of Qtr. 3 sales in Qtr. 82,080 3rd Qtr.Credit sales, collection of Qtr. 3 sales in Qtr. 3rd Qtr.Credit sales, collection of Qtr. 3 sales in Qtr. 4th Qtr.Cash sales $ 54,720 16,400 88,560 147,680|| $ 159,680|| $ 4th Qtr.Credit sales, collection of Qtr. 4 sales in Qtr. 4 $ 106,920|| $ 135,680 $ 549,960 Total cash receipts from customers Accounts Receivable balance, December 31, 2019: 4th Qtr.Credit sales, collection of Qtr. 4 sales in Qtr. 1 of 2020 $ 59,040 Cash Payments First Second Third Fourth Quarter Quarter Quarter Quarter Total Total direct materials purchases $ 49,856 $ 35,530 $ 38,380 $ 27,854 $ 151,620 First Second Third Fourth 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 | 15,000 39,885 1st Qtr.Qtr. 1 direct material purchases paid in Qtr. 2 $ 9,971 28,424 $ 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 7,106 30,704 $ 7,676 22,283 29,959 $ 54,885) Total payments for direct materials 38,395 37,810 161,049 Direct Labor: Total payments for direct labor 16.800 | 14,480 || 15,680| 16,880 || 63,840 Manufacturing Overhead: Variable manufacturing overhead Utilities, insurance, property taxes 2,100 7,980 1,810 14,157 15,967 14,157 16,257 1,960 14,157 16,117 2,110 14,157 16,267 56,628 64,608 14,000 14,000 56,000 14,000 3,600 3,600 Selling and Administrative Expenses: Salaries Expense Rent Expense Insurance Expense Supplies Expense Total payments for Selling and Admin. expenses 900 14,000 3,600 900 4,200| 22,700 900 3.600 3,600 900 4,920 23,420 17,520 3,840 22,340 4,560 23,060 91,520 Income Taxes: Total payments for income taxes 3,500 3,5000 3,500 || 3,500| 14,000 Total payments for income taxes 3,500 3,500 3,500 3,500 14,000 Capital Expenditures: Total payments for capital expenditures 30,000 30,000 $ Total cash payments (before interest) 143,782||$ 95,042||$ 96,167||$ 90,026|| $ 425,017 Accounts Payable balance, December 31, 2019: 4th Qtr.Qtr. 4 direct material purchases paid in Qtr. 1 of 2020 $ 5,571 Giseppe Tire Company Cash Budget For the Year Ended December 31, 2019 First Quarter Beginning cash balance Cash receipts Cash available Cash payments: Capital expenditures Purchases of direct materials Direct labor Manufacturing overhead Selling and administrative expenses Income taxes Interest expense Total cash payments Ending cash balance before financing Minimum cash balance desired Projected cash excess (de ciency) Borrowing Principal repayments Total effects of financing Ending cash balance