facturing 1. 3rd Qtr. DM purchases $15,600 T The Gavin Tire Goppany manufactures

Question

facturing 1. 3rd Qtr. DM purchases $15,600 T The Gavin Tire Goppany manufactures racing tires for bicycles. avin sells ties for $70 cach. Gavin s plaoning for the next year by developing a master bodget by quarters Gavin's balance sheet for December 31, 2018, folliows 4th Qtr total cash pevts. (before nterest) $60,810 GAVIN TIRE COMPANY Balance Sheet 21, 2018 Current Assets 20,000 30,000 Accounts Receivable Raw Materias Inventory Finished Goods Inventory Total Current Assets 3,000 63,800 Property, Plant, and Equipmet 168,000 (quipment Less: Accumulated Depreciation 0000 13.00 Total Asvets 192.800 Liabilities Current Liabilities Accounts Payable s 16,000 Stockholders' Equity 130,000 46,800 Common Stock, no par Retained Earnings 176.800 Total Stockholders Equity Total Liabilities and Stockholders' Equity Other data for Gavin Tire Company: a. Budgeted sales are 1,000 tires for the first quarter and expected to increase by 200 tires remaining 90% of sales on account. b. Finished Goods Inventory on December 31, 2018, consists of 300 tires at $36 each. nd by Brocke Cosleb

Explanation / Answer

Sales Budget 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Total Unit Sales 1200 1400 1600 1800 6000 Unit selling price 70 70 70 70 70 Budgeted Sales 84000 98000 112000 126000 420000 Cash sales (10%) 8400 9800 11200 12600 42000 Credit Sales 75600 88200 100800 113400 378000 Schedule of collections: 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Total Budgeted Sales 84000 98000 112000 126000 420000 Collections: Cash sales (10%) 8400 9800 11200 12600 42000 Credit Sales: Receivables as at Jan.1 30000 30000 1st Quarter Sales 58800 25200 84000 2nd Quarter Sales 68600 29400 98000 3rd Quarter Sales 78400 30240 108640 4th Quarter Sales 79380 79380 Total Collections 88800 93800 107800 109620 400020 Receivables 25200 29400 33600 49980 49980 Production Budget 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Total Budgeted Sales Units 1200 1400 1600 1800 6000 Add: Ending inventory 560 640 720 720 720 (40% of next quarter's sales) Units required 1760 2040 2320 2520 6720 Less: Beginning Inventory 300 560 640 720 300 Budgeted Production units 1460 1480 1680 1800 6420 Material Purchase Budget 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Total Budgeted Production units 1460 1480 1680 1800 6420 Material per unit (pounds) 2.5 2.5 2.5 2.5 2.5 Material required for production (pounds) 3650 3700 4200 4500 16050 Add: Ending inventory (pounds) 1480 1680 1800 750 750 (40%of next quarter's requirement) Total material required (pound) 5130 5380 6000 5250 16800 Less: Beginning Inventory   (pound) 750 1480 1680 1800 750 Budgeted material purchases( ponud) 4380 3900 4320 3450 16050 Cost per pound of material ($) 4 4 4 4 4 Budgeted material purchases ($) 17520 15600 17280 13800 64200 Schedule of payments for material 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Total Budgeted Purchases ($) 17520 15600 17280 13800 64200 Payments: Payables as at Jan.1 16000 16000 1st Quarter purchases 8760 8760 17520 2nd Quarter purchases 7800 7800 15600 3rd Quarter purchases 8640 8640 17280 4th Quarter purchases 6900 6900 Payment for purchases 24760 16560 16440 15540 73300 Payables 8760 7800 8640 6900 6900 Direct labor budget 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Total Budgeted production units 1460 1480 1680 1800 6420 Ditect labor hours per unit 0.3 0.3 0.3 0.3 0.3 Direct labor hours for production 438 444 504 540 1926 Direct labor rate per hour ($) 20 20 20 20 20 Budgeted direct labor cost ($) 8760 8880 10080 10800 38520 Manufacturing overhead budget 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Total Budgeted production units 1460 1480 1680 1800 6420 Variable overhead rate per unit ($) 3 3 3 3 3 Budgeted variable overhead ($) 4380 4440 5040 5400 19260 Budgeted fixed overhead    ($) 16860 16860 16860 16860 67440 Budgeted manufacturing overhead ($) 21240 21300 21900 22260 86700 Depreciation 6000 6000 6000 6000 24000 Cash payment for manufacturing overheads 15240 15300 15900 16260 62700 Cost of goods sold budget 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Total Material required for production (pounds) 3650 3700 4200 4500 16050 Cost per gram of material ($) 4 4 4 4 Direct material cost 14600 14800 16800 18000 64200 Direct labor cost 8760 8880 10080 10800 38520 Manufacturing overhead 21240 21300 21900 22260 86700 Total cost of manufacture 44600 44980 48780 51060 189420 Budgeted production units 1460 1480 1680 1800 6420 Unit cost of production 30.55 30.39 29.04 28.37 29.50 Cost of manufacture 44600 44980 48780 51060 189420 Add: Beginning finished goods inventory 23500 24438 36470 23500 10800 Finished goods available for sale 68100 69418 85250 74560 200220 Less: Ending finished goods inventory 17107 19451 20906 20424 21243 Cost of goods sold budget 50993 49968 64345 54136 178977 Selling and Administrative expenses budget 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Total Supplis (2% of sales) 1680 1960 2240 2520 8400 Salaries expense 8000 8000 8000 8000 32000 Rent expense 4800 4800 4800 4800 19200 Insurance 1950 1950 1950 1950 7800 Depreciation 2000 2000 2000 2000 8000 Budgeted selling and administrative exp. 18430 18710 18990 19270 75400 Cash Payment for S & A expenses 16430 16710 16990 17270 67400 Budgeted Income Statement 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Total Sales revenue 84000 98000 112000 126000 420000 Cost of goods sold 50993 49968 64345 54136 219441 Gross profit 33007 48032 47655 71864 200559 Selling and administrative expenses: Supplis (2% of sales) 1680 1960 2240 2520 8400 Salaries expense 8000 8000 8000 8000 32000 Rent expense 4800 4800 4800 4800 19200 Insurance 1950 1950 1950 1950 7800 Depreciation 2000 2000 2000 2000 8000 Total Selling and administrative expenses 18430 18710 18990 19270 75400 Operating Income 14577 29322 28665 52594 125159 Interest expense -40 -40 Income before income tax 14577 29362 28665 52594 125199 Income tax 3500 3500 3500 3500 14000 Net income 11077 25862 25165 49094 111199 Cash Budget 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Total Beginning Cash Balance 20000 20610 54920 103310 20000 Collection from sales 88800 93800 107800 109620 400020 Total cash available for disbursements 108800 114410 162720 212930 420020 Cash disbursements :    For purchase of material 24760 16560 16440 15540 73300    For direct labor 8760 8880 10080 10800 38520    For manufacturing overhead 15240 15300 15900 16260 62700    For selling and administrative expenses 16430 16710 16990 17270 67400    For capital expenditure 25000 25000 Total cash disbursemenrs 90190 57450 59410 59870 266920 Cash surplus / (deficit) 18610 56960 103310 153060 153100 Minimum cash balance 20000 20000 20000 20000 20000 Cash excess / (shortage) -1390 36960 83310 133060 133100 Financing: Borrowing/ (Repayment) 2000 -2000 0 Interest -40 -40 total Finance 2000 -2040 0 0 -40 Ending Cash Balance 20610 54920 103310 153060 153060

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