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In: Accounting
The Gessing Tire Company manufactures racing tires for bicycles. Gessing sells tires for $85 each. Gessing...
The Gessing Tire Company manufactures racing tires for bicycles. Gessing sells tires for $85 each. Gessing is planning for the next year by developing a master budget by quarters. Gessing’s balance sheet for December 31, 2018, follows:
Gessing Tire Company| Balance sheet |December 31, 2018
Current Assets:
Cash $ 52,000
Accounts Receivable 35,000
Raw Materials Inventory 1,900
Finished Goods Inventory 2,400
________
Total Current Assets $ 91,300
Property, Plant, and Equipment:
Equipment 142,000
Less: Accumulated Depreciation (50,000) 92,000
_________ ________
Total Assets $ 183,300
==============
Liabilities
Current Liabilities:
Accounts Payable $10,000
Stockholder’s Equity
Common Stock, no par $ 110,000
Retained Earnings 63,300
_________
Total Stockholders’ Equity 173,300
_______
Total Liabilities and Stockholder’s Equity $ 183,300
========
Other data for Gessing Tire Company:
- Budgeted sales are 1,000 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.
- Finished Goods Inventory on December 31, 2018 consists of 100 tires at $24 each.
- Desired ending Finished Goods Inventory is 50% of the next quarter's sales; first quarter sales for 2020 are expected be 1,400 tires. FIFO inventory costing method is used.
- Raw Materials Inventory on December 31, 2018, consists of 200 pounds of rubber compound used to manufacture the tires.
- Direct materials requirements are 2 pounds of a rubber compound per tire. The cost of the compound is $9.50 per pound.
- Desired ending Raw Materials Inventory is 10% of the next quarter's direct materials needed for production; desired ending inventory for December 31, 2019 is 200 pounds; indirect materials are insignificant and not considered for budgeting purposes.
- Each tire requires 0.60 hours of direct labor; direct labor costs average $16 per hour.
- Variable manufacturing overhead is $2 per tire.
- Fixed manufacturing overhead includes $3,500 per quarter in depreciation and $28,220 per quarter for other costs, such as utilities, insurance, and property taxes.
- Fixed selling and administrative expenses include $8,000 per quarter for salaries; $5,700 per quarter for rent; $1,650 per quarter for insurance; and $1,000 per quarter for depreciation.
- Variable selling and administrative expenses include supplies at 1% of sales
- Capital expenditures include $35,000 for new manufacturing equipment, to be purchased and paid in the first quarter.
- Cash receipts for sales on account are 80% in the quarter of sale and 20% in the quarter following the sale; December 31, 2018, Accounts receivable is received in the first quarter of 2019, uncollectible accounts are considered insignificant not considered for budgeting purposes.
- Direct materials purchases are paid 80% in the quarter of the sale and 20% in the following quarter; December 31, 2018, Accounts payable is paid in the first quarter of 2019.
- Direct labor, manufacturing overhead, and selling and administrative costs are paid in the quarter incurred.
- Income tax expense is projected at $3,000 per quarter and is paid in the quarter incurred.
- Gessing desires to maintain a minimum cash balance of $50,000 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.
Read the requirments:
- Prepare Gessing's operating budget and cash budget for 2019 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.
- Prepare Gessing's annual financial budget for 2019, including budgeted income statement and budgeted balance sheet.
Prepare sales budget:
Gessing Tire Company |Sales Budget |For the Year ended December 31, 2019
1st Quarter|2nd quarter| 3rd quarter|4th quarter|Total
Budgeted tires to be sold
Sales Price per unit $ 85 85 85 85 85
Total Sales $
Prepare production budget:
Gessing Tire Company
Production budget
For the year ended in December 31, 2019
1st quarter | 2nd quarter | 3rd quarter | 4th quarter | Total
Budgeted tires to be sold
Plus: Desired tires in
Ending inventory
Total tired needed
Less: Tires in beginning inventory
Budgeted tires to be produced
Prepare the direct materials budget.
Gessing Tire Company
Direct materials budget
For the year ended December 31, 2019
1st quarter | 2nd quarter | 3rd quarter | 4th quarter | total
Budgeted tires to be produced
Direct materials per tire
Direct materials needed for production
Plus: Desired direct materials in ending inventory
Total direct materials needed
Less: Direct materials in beginning inventory
Budgeted purchases of direct materials
Direct materials cost per pound
Budgeted cost of direct materials
Prepare direct labor budget.
Tire Company
Direct Labor Budget
For the year ended December 2019
1st quarter | 2nd quarter | 3rd quarter | 4th quarter | Total
Budgeted tires to be produced
Direct labor hours per unit
Direct labor hours needed
For production
Direct labor cost per hour
Budgeted tires to be produced
Direct labor hours per unit
Direct labor hours needed for production
Direct labor cost per hour
Budgeted direct labor cost
Prepare manufacturing overhead budget.
Review production budget you prepared above
Review direct labor budget you prepared above
Tire Company
Manufacturing Overhead Budget
For the year ended December 31, 2019
1st quarter | 2nd quarter | 3rd quarter | 4th quarter | total
Budgeted tires to be produced
OH cost per tire
Budgeted VOH
Budgeted FOH
Deprecation
Utilities, insurance, property taxes
Total budgeted FOH
Budgeted manufacturing overhead costs
Direct labor hours
Budgeted manufacturing overhead costs
predetermined overhead allocation rate
Before preparing the costs of goods sold budget, calculate the projected manufacturing cost per tire for 2019.
Direct materials cost per tire
Direct labor cost per tire
Manufacturing overhead cost per tire
Total projected manufacturing cost per tire for 2019
Now prepare the cost of goods sold budget.
Cost of goods sold budget
For the year ended December 31, 2019
1st quarter | 2nd quarter | 3rd quarter | 4th quarter| total
Beginning inventory
Tires produced and sold in 2019
Total budgeted costs of goods sold
Prepare the selling and administrative expense budget.
Selling and Administrative Expense Budget
For the year ended December 31, 2019
1st quarter | 2nd quarter | 3rd quarter | 4th quarter | total
Salaries expense
Rent expense
Insurance expense
Depreciation expense
Supplies expense
Total budgeted selling and
Administrative expense $
Solutions
Expert Solution
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| Gessing Tire Company | ||||||
| Sales Budget | Qtr. 1 | Qtr. 2 | Qtr. 3 | Qtr. 4 | Total | Note |
| Budgeted sales (Units) | 1,000.00 | 1,100.00 | 1,200.00 | 1,300.00 | 4,600.00 | A |
| Sell price | 85.00 | 85.00 | 85.00 | 85.00 | B | |
| Budgeted sales ($) | 85,000.00 | 93,500.00 | 102,000.00 | 110,500.00 | 391,000.00 | C=A*B |
| Cash Sales at 20% | 17,000.00 | 18,700.00 | 20,400.00 | 22,100.00 | 78,200.00 | D=C*20% |
| Credit Sales at 80% | 68,000.00 | 74,800.00 | 81,600.00 | 88,400.00 | 312,800.00 | E=C*80% |
| Production Budget | Qtr. 1 | Qtr. 2 | Qtr. 3 | Qtr. 4 | Total | Qtr. 1 | Note |
| Budgeted sales (Units) | 1,000.00 | 1,100.00 | 1,200.00 | 1,300.00 | 4,600.00 | 1,400.00 | See A |
| Add: Closing | 550.00 | 600.00 | 650.00 | 700.00 | 700.00 | F=50% of A of next month. | |
| Less: Opening | 100.00 | 550.00 | 600.00 | 650.00 | 100.00 | G=50% of A of same month. For Quarter 1 its given in the problem. | |
| Production Budget | 1,450.00 | 1,150.00 | 1,250.00 | 1,350.00 | 5,200.00 | H |
| Direct Material Budget | Qtr. 1 | Qtr. 2 | Qtr. 3 | Qtr. 4 | Total | Note |
| Production Budget | 1,450.00 | 1,150.00 | 1,250.00 | 1,350.00 | 5,200.00 | See H |
| Material required per unit | 2.00 | 2.00 | 2.00 | 2.00 | I | |
| Material Usage Budget | 2,900.00 | 2,300.00 | 2,500.00 | 2,700.00 | 10,400.00 | J=H*I |
| Add: Closing | 230.00 | 250.00 | 270.00 | 200.00 | 200.00 | F=10% of J of next month. |
| Less: Opening | 200.00 | 230.00 | 250.00 | 270.00 | 200.00 | L=10% of J of same month. For Quarter 1 and 4 its given in the problem. |
| Material Purchase Budget (Pound) | 2,930.00 | 2,320.00 | 2,520.00 | 2,630.00 | 10,400.00 | M |
| Cost per pound | 9.50 | 9.50 | 9.50 | 9.50 | N | |
| Material Purchase Budget ($) | 27,835.00 | 22,040.00 | 23,940.00 | 24,985.00 | 98,800.00 | O=M*N |
| Direct Labor Budget | Qtr. 1 | Qtr. 2 | Qtr. 3 | Qtr. 4 | Total | |
| Production Budget | 1,450.00 | 1,150.00 | 1,250.00 | 1,350.00 | 5,200.00 | See H |
| Labor Hour required per unit | 0.60 | 0.60 | 0.60 | 0.60 | Q | |
| Labor Hour required | 870.00 | 690.00 | 750.00 | 810.00 | 3,120.00 | R=H*Q |
| Cost per Hour | 16.00 | 16.00 | 16.00 | 16.00 | S | |
| Direct Labor Budget | 13,920.00 | 11,040.00 | 12,000.00 | 12,960.00 | 49,920.00 | T=R*S |
| Manufacturing overhead Budget | ||||||
| Variable manufacturing overhead Budget | Qtr. 1 | Qtr. 2 | Qtr. 3 | Qtr. 4 | Total | |
| Production Budget | 1,450.00 |
 ekkarill92 answered 1 year agoRelated SolutionsThe Gessing Tire Company manufactures racing tires for bicycles. Gessing sells tires for $85 each. Gessing...
The
Gessing Tire Company manufactures racing tires for bicycles.
Gessing sells tires for $85 each. Gessing is planning for the next
year by developing a master budget by quarters. Gessing’s balance
sheet for December 31, 2018, follows:
Gessing Tire Company
Balance sheet
December 31, 2018
Current
Assets:
Cash
$
52,000
Accounts Receivable
35,000
Raw Materials Inventory 1,900
Finished Goods Inventory 2,400
________
Total Current Assets
$
91,300
Property, Plant, and Equipment:
Equipment
142,000
Less: Accumulated Depreciation (50,000)
92,000
_________
________...
The Grilton Tire Company manufactures racing tires for bicycles. Grilton sells tires for $50 each. Grilton...The Grilton Tire Company manufactures racing tires for bicycles.
Grilton sells tires for $50 each. Grilton is planning for next year
(2020) by developing a master budget by quarters. Grilton’s balance
sheet for December 31, 2019 follows:
GRILTON TIRE COMPANY
Balance Sheet
December 31, 2019
Assets
Current Assets:
Cash $ 39,000
Accounts
Receivable 40,000
Raw Materials
Inventory 2,400
Finished Goods
Inventory 8,700
Total Current
Assets $
90,100
Property, Plant and Equipment:
Equipment 177,000
Less: Accumulated
Depreciation (42,000) 135,000
Total
Assets $225,100
Liabilities
Current Liabilities:
Accounts
Payable $ 8,000
Stockholder’s Equity
Common Stock,...
The Grilton Tire Company manufactures racing tires for bicycles. Grilton sells tires for $50 each. Grilton...The Grilton Tire Company manufactures racing tires for bicycles.
Grilton sells tires for $50 each. Grilton is planning for next year
by developing a master budget by quarters. Grilton’s balance sheet
for December 31, 2016 follows:
GRILTON TIRE COMPANY
Balance Sheet
December 31, 2016
Assets
Current Assets:
Cash
$
39,000
Accounts
Receivable
40,000
Raw Materials
Inventory
2,400
Finished Goods
Inventory
8,700
Total Current
Assets
$
90,100
Property, Plant and Equipment:
Equipment
177,000
Less:...
The Grilton Tire Company manufactures racing tires for bicycles. Grilton sells tires for $50 each. Grilton...The Grilton Tire Company manufactures racing tires for bicycles.
Grilton sells tires for $50 each. Grilton is planning for next year
by developing a master budget by quarters. Grilton’s balance sheet
for December 31, 2017 follows:
GRILTON TIRE COMPANY
Balance Sheet
December 31, 2017
Assets
Current Assets:
Cash
$
39,000
Accounts
Receivable
40,000
Raw Materials
Inventory
2,400
Finished Goods
Inventory
8,700
Total Current
Assets
$ 90,100
Property, Plant and Equipment:
Equipment
177,000
Less:...
The Grilton Tire Company manufactures racing tires for bicycles. Grilton sells tires for $50 each. Grilton...The Grilton Tire Company manufactures racing tires for bicycles.
Grilton sells tires for $50 each. Grilton is planning for next year
by developing a master budget by quarters. Grilton’s balance sheet
for December 31, 2016 follows:
GRILTON TIRE COMPANY
Balance Sheet
December 31, 2016
Assets
Current Assets:
Cash
$
39,000
Accounts
Receivable
40,000
Raw Materials
Inventory
2,400
Finished Goods
Inventory
8,700
Total Current
Assets
$
90,100
Property, Plant and Equipment:
Equipment
177,000
Less:...
The Grilton Tire Company manufactures racing tires for bicycles. Grilton sells tires for $50 each. Grilton...
The Grilton Tire Company manufactures racing tires for bicycles.
Grilton sells tires for $50 each. Grilton is planning for next year
by developing a master budget by quarters. Grilton’s balance sheet
for December 31, 2016 follows:
GRILTON TIRE COMPANY
Balance Sheet
December 31, 2016
Assets
Current Assets:
Cash $ 39,000
Accounts
Receivable 40,000
Raw Materials
Inventory 2,400
Finished Goods
Inventory 8,700
Total Current
Assets $ 90,100
Property, Plant and Equipment:
Equipment 177,000
Less: Accumulated
Depreciation (42,000) 135,000
Total
Assets $225,100
Liabilities
Current Liabilities:
Accounts
Payable $ 8,000
Stockholder’s Equity
Common Stock, no
par $...
The Grilton Tire Company manufactures racing tires for bicycles. Grilton sells tires for $50 each. Grilton...The Grilton Tire Company manufactures racing tires for bicycles.
Grilton sells tires for $50 each. Grilton is planning for next year
by developing a master budget by quarters. Grilton’s balance sheet
for December 31, 2017 follows:
GRILTON TIRE COMPANY
Balance Sheet
December 31, 2017
Assets
Current Assets:
Cash
$
39,000
Accounts
Receivable
40,000
Raw Materials
Inventory
2,400
Finished Goods
Inventory
8,700
Total Current
Assets
$ 90,100
Property, Plant and Equipment:
Equipment
177,000
Less:...
The Grilton Tire Company manufactures racing tires for bicycles. Grilton sells tires for $50 each. Grilton...
The Grilton Tire Company manufactures racing tires for
bicycles. Grilton sells tires for $50 each. Grilton is planning for
next year by developing a master budget by quarters. Grilton’s
balance sheet for December 31, 2016 follows:
GRILTON TIRE COMPANY
Balance Sheet
December 31, 2016
Assets
Current Assets:
Cash $ 39,000
Accounts Receivable 40,000
Raw Materials Inventory 2,400
Finished Goods Inventory 8,700
Total Current Assets $ 90,100
Property, Plant and Equipment:
Equipment 177,000
Less: Accumulated Depreciation (42,000) 135,000
Total Assets $225,100...
Only need what is in bold. Thank you. The Gessing Tire Company manufactures racing tires for...Only need what is in bold. Thank you.
The Gessing Tire Company manufactures racing tires for bicycles.
Gessing sells tires for $85 each. Gessing is planning for the next
year by developing a master budget by quarters. Gessing’s balance
sheet for December 31, 2018, follows:
Gessing Tire Company
Balance sheet
December 31, 2018
Current Assets:
Cash
$
52,000
Accounts Receivable
35,000
Raw Materials Inventory 1,900
Finished Goods Inventory 2,400
________
Total Current Assets
$
91,300
Property, Plant, and Equipment:
Equipment...
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