The Gerard Tire Company manufactures racing tires for bicycles. Gerard sells tires for $90 each….
The Gerard Tire Company manufactures racing tires for bicycles. Gerard sells tires for $90 each. Gerard is planning for the next year by developing a master budget by quarters. Gerard’s balance sheet for December 31, 2018, follows: Other data for Gerard Tire Company: Budgeted sales are 1,500 tires for the first quarter and expected to increase by 200 tires per quarter. Cash sales are expected to be 10% of total sales, with the remaining 90% of sales on account. Finished Goods Inventory on December 31, 2018, consists of 300 tires at $33 each. Desired ending Finished Goods Inventory is 30% of the next quarter’s sales; first quarter sales for 2020 are expected to be 2,300 tires. FIFO inventory costing method is used. Raw Materials Inventory on December 31, 2018, consists of 600 pounds of rubber compound used to manufature the tires. Direct materials requirements are 2 pounds of a rubber compound per tire. The cost of the compound is $8.50 per pound. 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 600 pounds; indirect materials are insignificant and not considered for budgeting purposes. Each tire requires 0.4 hours of direct labor; direct labor costs average $12 per hour. Variable manufacturing overhead is $4 per tire. Fixed manufacturing overhead includes $6,000 per quarter in depreciation and $16,770 per quarter for other costs, such as utilities, insurance, and property taxes. Fixed selling and administrative expenses include $12,500 per quarter for salaries; $3,000 per quarter for rent; $450 per quarter for insurance; and $2,000 per quarter for depreciation. Variable selling and administrative expenses include supplies at 2% of sales. Capital expenditures include $15,000 for new manufacturing equipment, to be purchased and paid in the first quarter. Cash receipts for sales on account are 70% in the quarter of the sale and 30% 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. Direct materials purchases are paid 60% in the quarter purchased and 40% 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 $1,500 per quarter and is paid in the quarter incurred. Gerard desires to maintain a minimum cash balance of $55,000 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. Requirements Prepare Gerard’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. 3rd Qtr. DM purchases $34,680
4th Qtr. total cash pmts. (before interest) $87,159 Prepare Gerard’s annual financial budget for 2019, including budgeted income statement and budgeted balance sheet. Mar 29 2022 03:03 PM
Delivering a high-quality product at a reasonable price is not enough anymore.
That’s why we have developed 5 beneficial guarantees that will make your experience with our service enjoyable, easy, and safe.
You have to be 100% sure of the quality of your product to give a money-back guarantee. This describes us perfectly. Make sure that this guarantee is totally transparent.Read more
Each paper is composed from scratch, according to your instructions. It is then checked by our plagiarism-detection software. There is no gap where plagiarism could squeeze in.Read more
Thanks to our free revisions, there is no way for you to be unsatisfied. We will work on your paper until you are completely happy with the result.Read more
Your email is safe, as we store it according to international data protection rules. Your bank details are secure, as we use only reliable payment systems.Read more
By sending us your money, you buy the service we provide. Check out our terms and conditions if you prefer business talks to be laid out in official language.Read more