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Prepare the production budget. Review the sales budget you prepared above. Review the production budget you prepared above. Grady Tire Company Direct Materials Budget For the Year Ended December 31, 2025 \begin{tabular}{|c|c|c|c|c|c|} \hline & \begin{tabular}{c} First \\ Quarter \end{tabular} & \begin{tabular}{l} Second \\ kaurter \end{tabular} & \begin{tabular}{l} Third \\ Quarter \end{tabular} & \begin{tabular}{l} Fourth \\ Quarter \end{tabular} & Total \\ \hline Budgeted tires to be produced & 1,880 & 1,920 & 2,020 & 2,120 & 7,940 \\ \hline Direct materials per tire & 2 & 2 & 2 & 2 & 2 \\ \hline Direct materials needed for production & 3,760 & 3,840 & 4,040 & 4,240 & 15,880 \\ \hline Plus: Desired direct materials in ending inventory & 768 & 808 & 848 & 600 & 600 \\ \hline Total direct materials needed & 4,528 & 4,648 & 4,888 & 4,840 & 16,480 \\ \hline Less: Direct materials in beginning inventory & 600 & 768 & 808 & 848 & 600 \\ \hline Budgeted purchases of direct materials & 3,928 & 3.880 & 4,080 & 3,992 & 15,880 \\ \hline Direct materiais cost per pound & 5.00 & 5.00 & 5.00 & 5.00 & 5.00 \\ \hline Budgeted cost of direct materials & 19,640 & $19,400 & 20,400 & 19,960 & 79,400 \\ \hline \end{tabular} Prepare the direct labor budget. (Enter any hours per unit amounts to two decimal places, XXX, and round all other ampunts th th Review the production budget you prepared above. Prepare the manufacturing overhead budget. (Abbroviations used: VOH= variable manufacturing overhead; FOH= fixed manufacturing overhead.) Review the production budget you prepared above. Review the direct labor budget you prepared above. tires. FIFO inventory costing method is used. d. Raw Materials Inventory on December 31,2024 , consists of 600 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 $5.00 per pound. f. Desired ending Raw Materials Inventory is 20% of the next quarter's direct materials needed for production; desired ending inventory for December 31,2025 is 600 pounds; indirect materials are insignificant and not considered for budgeting purposes. g. Each tire requires 0.60 hours of direct labor; direct labor costs average $25 per hour. h. Variable manufacturing overhead is $5 per tire. i. Fixed manufacturing overhead includes $5,500 per quarter in depreciation and $13,159 per quarter for other costs, such as utilities, insurance, and property taxes. j. Fixed selling and administrative expenses include $13,000 per quarter for salaries; $1,800 per quarter for rent; $1,350 per quarter for insurance; and $2,000 per quarter for depreciation. k. Variable selling and administrative expenses include supplies at 2% of sales. I. Capital expenditures include $55,000 for new manufacturing equipment, to be purchased and paid in the first quarter. m. Cash receipts for sales on account are 75% in the quarter of the sale and 25% 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 90% in the quarter purchased and 10% in the following quarter; Direct laber 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. incurred. p. Income tax expense is projected at $4,000 per quarter and is paid in the quarter incurred. q. Grady desires to maintain a minimum cash balance of $50,000 and borrows from the local bank as The Grady Tire Company manufactures racing tires for bicycles. Grady sells tires for $70 each. Grady is planning for the next year by developing a master budget by quarters. Grady's balance sheet for December 31, 2024, follows: Other data for Grady Tire Company: (Click the icon to view the balance sheet.) (1) (Click the icon to view the other data.) Read the requirements. Review the production budget you presared above. Review the direct labor budget you prepared above. Prepare the production budget. Review the sales budget you prepared above. Review the production budget you prepared above. Grady Tire Company Direct Materials Budget For the Year Ended December 31, 2025 \begin{tabular}{|c|c|c|c|c|c|} \hline & \begin{tabular}{c} First \\ Quarter \end{tabular} & \begin{tabular}{l} Second \\ kaurter \end{tabular} & \begin{tabular}{l} Third \\ Quarter \end{tabular} & \begin{tabular}{l} Fourth \\ Quarter \end{tabular} & Total \\ \hline Budgeted tires to be produced & 1,880 & 1,920 & 2,020 & 2,120 & 7,940 \\ \hline Direct materials per tire & 2 & 2 & 2 & 2 & 2 \\ \hline Direct materials needed for production & 3,760 & 3,840 & 4,040 & 4,240 & 15,880 \\ \hline Plus: Desired direct materials in ending inventory & 768 & 808 & 848 & 600 & 600 \\ \hline Total direct materials needed & 4,528 & 4,648 & 4,888 & 4,840 & 16,480 \\ \hline Less: Direct materials in beginning inventory & 600 & 768 & 808 & 848 & 600 \\ \hline Budgeted purchases of direct materials & 3,928 & 3.880 & 4,080 & 3,992 & 15,880 \\ \hline Direct materiais cost per pound & 5.00 & 5.00 & 5.00 & 5.00 & 5.00 \\ \hline Budgeted cost of direct materials & 19,640 & $19,400 & 20,400 & 19,960 & 79,400 \\ \hline \end{tabular} Prepare the direct labor budget. (Enter any hours per unit amounts to two decimal places, XXX, and round all other ampunts th th Review the production budget you prepared above. Prepare the manufacturing overhead budget. (Abbroviations used: VOH= variable manufacturing overhead; FOH= fixed manufacturing overhead.) Review the production budget you prepared above. Review the direct labor budget you prepared above. tires. FIFO inventory costing method is used. d. Raw Materials Inventory on December 31,2024 , consists of 600 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 $5.00 per pound. f. Desired ending Raw Materials Inventory is 20% of the next quarter's direct materials needed for production; desired ending inventory for December 31,2025 is 600 pounds; indirect materials are insignificant and not considered for budgeting purposes. g. Each tire requires 0.60 hours of direct labor; direct labor costs average $25 per hour. h. Variable manufacturing overhead is $5 per tire. i. Fixed manufacturing overhead includes $5,500 per quarter in depreciation and $13,159 per quarter for other costs, such as utilities, insurance, and property taxes. j. Fixed selling and administrative expenses include $13,000 per quarter for salaries; $1,800 per quarter for rent; $1,350 per quarter for insurance; and $2,000 per quarter for depreciation. k. Variable selling and administrative expenses include supplies at 2% of sales. I. Capital expenditures include $55,000 for new manufacturing equipment, to be purchased and paid in the first quarter. m. Cash receipts for sales on account are 75% in the quarter of the sale and 25% 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 90% in the quarter purchased and 10% in the following quarter; Direct laber 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. incurred. p. Income tax expense is projected at $4,000 per quarter and is paid in the quarter incurred. q. Grady desires to maintain a minimum cash balance of $50,000 and borrows from the local bank as The Grady Tire Company manufactures racing tires for bicycles. Grady sells tires for $70 each. Grady is planning for the next year by developing a master budget by quarters. Grady's balance sheet for December 31, 2024, follows: Other data for Grady Tire Company: (Click the icon to view the balance sheet.) (1) (Click the icon to view the other data.) Read the requirements. Review the production budget you presared above. Review the direct labor budget you prepared above

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