1.PrepareGrayson'soperating budget and cash budget for2025by 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.2.PrepareGrayson's annual financial budget for 2025, including budgeted income statement and budgeted balance sheet.---------------------------------------------------------------------------------------------------------------------The Grayson Tire Company manufactures racing tires for bicycles.Grayson sells tires for $70 each. Grayson is planning for the next year by developing a master budget by quarters. Grayson's balance sheet for December 31, 2024, is asfollows:Grayson Tire CompanyBalance SheetDecember 31, 2024AssetsCurrent Assets: Cash$71,000 Accounts Receivable45,000 Raw Materials Inventory11,900 Finished Goods Inventory21,700 Total Current Assets $149,600Property, Plant, and Equipment: Equipment168,000 Less: Accumulated Depreciation(83,000)85,000Total Assets $234,600LiabilitiesCurrent Liabilities: Accounts Payable $11,000Stockholders' EquityCommon Stock, no par$170,000 Retained Earnings53,600 Total Stockholders' Equity 223,600Total Liabilities and Stockholders' Equity $234,600 ------------------------------------------------------------- (Unless otherwise noted, assume all of the following events occurred during2024 and that any balances given are stated as of December 31, 2024.)a.Budgeted sales are 1,200 tires for the first quarter and expected to increase by 200 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, 2024 consists of 700 tires at $31 each.c.Desired ending Finished Goods Inventory is 20% of the next quarter's sales; first quarter sales for 2026 are expected be 2,000 tires. FIFO inventory costing method is used.d.Raw Materials Inventory on December 31, 2024, consists of 1,400 pounds of rubber compound used to manufacture the tires.e.Direct materials requirements are two pounds of a rubber compound per tire. The cost of the compound is $8.50 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, 2025 is 1,400 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 $25 per hour.h.Variable manufacturing overhead is $3 per tire.i.Fixed manufacturing overhead includes $1,500 per quarter in depreciation and $22,725 per quarter for other costs, such as utilities, insurance, and property taxes.j.Fixed selling and administrative expenses include $10,000 per quarter for salaries; $5,100 per quarter for rent; $1,200 per quarter for insurance; and $500 per quarter for depreciation.k.Variable selling and administrative expenses include supplies at 2% of sales.l.Capital expenditures include $35,000 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 sale; December 31, 2024, Accounts Receivable is received in the first quarter of 2025; 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, 2024, Accounts Payable is paid in the first quarter of 2025.o.Direct labor, manufacturing overhead, and selling and administrative costs are paid in the quarter incurred.p.Income tax expense is projected at $2,000 per quarter and is paid in the quarter incurred.q.Grayson 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 12% per year and paid at the beginning of the quarter based on the amount outstanding from the previous quarter.

Cash Budget - A cash budget is a strategy for tracking an organization's cash inputs and outflows.…

Answered: budget, manufacturing overhead budget,…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

Prepare

Grayson's

operating budget and cash budget for

2025

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

Grayson's annual financial budget for 2025, including budgeted income statement and budgeted balance sheet.

---------------------------------------------------------------------------------------------------------------------

The Grayson Tire Company manufactures racing tires for bicycles.

Grayson sells tires for $70 each. Grayson is planning for the next year by developing a master budget by quarters.

Grayson's balance sheet for December 31, 2024, is as

follows:

Grayson Tire Company

Balance Sheet

December 31, 2024

Assets

Current Assets:

Cash

$71,000

Accounts Receivable

45,000

Raw Materials Inventory

11,900

Finished Goods Inventory

21,700

Total Current Assets

$149,600

Property, Plant, and Equipment:

Equipment

168,000

Less: Accumulated Depreciation

(83,000)

85,000

Total Assets

$234,600

Liabilities

Current Liabilities:

Accounts Payable

$11,000

Stockholders' Equity

Common Stock, no par

$170,000

Retained Earnings

53,600

Total Stockholders' Equity

223,600

Total Liabilities and Stockholders' Equity

$234,600

-------------------------------------------------------------

(Unless otherwise noted, assume all of the following events occurred during

2024 and that any balances given are stated as of December 31, 2024.)

a.	Budgeted sales are 1,200 tires for the first quarter and expected to increase by 200 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, 2024 consists of 700 tires at $31 each.
c.	Desired ending Finished Goods Inventory is 20% of the next quarter's sales; first quarter sales for 2026 are expected be 2,000 tires. FIFO inventory costing method is used.
d.	Raw Materials Inventory on December 31, 2024, consists of 1,400 pounds of rubber compound used to manufacture the tires.
e.	Direct materials requirements are two pounds of a rubber compound per tire. The cost of the compound is $8.50 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, 2025 is 1,400 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 $25 per hour.
h.	Variable manufacturing overhead is $3 per tire.
i.	Fixed manufacturing overhead includes $1,500 per quarter in depreciation and $22,725 per quarter for other costs, such as utilities, insurance, and property taxes.
j.	Fixed selling and administrative expenses include $10,000 per quarter for salaries; $5,100 per quarter for rent; $1,200 per quarter for insurance; and $500 per quarter for depreciation.
k.	Variable selling and administrative expenses include supplies at 2% of sales.
l.	Capital expenditures include $35,000 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 sale; December 31, 2024, Accounts Receivable is received in the first quarter of 2025; 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, 2024, Accounts Payable is paid in the first quarter of 2025.
o.	Direct labor, manufacturing overhead, and selling and administrative costs are paid in the quarter incurred.
p.	Income tax expense is projected at $2,000 per quarter and is paid in the quarter incurred.
q.	Grayson 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 12% per year and paid at the beginning of the quarter based on the amount outstanding from the previous quarter.

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