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Requirement 1.

Prepare Grayson's operating budget and cash budget for 2017 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.

Begin by preparing the sales budget.

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Grayson Tire Company
Sales Budget
For the Year Ended December 31, 2017
	First	Second	Third	Fourth
	Quarter	Quarter	Quarter	Quarter	Total
Budgeted tires to be sold
Sales price per unit
Total sales

Prepare the production budget.

Review the sales budget you prepared above.

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Grayson Tire Company
Production Budget
For the Year Ended December 31, 2017
	First	Second	Third	Fourth
	Quarter	Quarter	Quarter	Quarter	Total

Plus:
Total tires needed
Less:
Budgeted tires to be produced

Prepare the direct materials budget.

Review the production budget you prepared above.

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Grayson Tire Company
Direct Materials Budget
For the Year Ended December 31, 2017
	First	Second	Third	Fourth
	Quarter	Quarter	Quarter	Quarter	Total

Direct materials cost per unit
Direct materials needed for production
Plus:
Total direct materials needed
Less:
Budgeted purchases of direct materials

Prepare the direct labor budget. (Enter any hours per unit amounts to two decimal places, X.XX, and round all other amounts to the nearest whole number.)

Review the production budget you prepared above.

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Grayson Tire Company
Direct Labor Budget
For the Year Ended December 31, 2017
	First	Second	Third	Fourth
	Quarter	Quarter	Quarter	Quarter	Total


Direct labor hours needed for production

Budgeted direct labor cost

Prepare the manufacturing overhead budget. (Abbreviations used: VOH = variable manufacturing overhead; FOH = fixed manufacturing overhead.)

Review the production budget you prepared above.

Review the direct labor budget you prepared above.

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Grayson Tire Company
Manufacturing Overhead Budget
For the Year Ended December 31, 2017
	First	Second	Third	Fourth
	Quarter	Quarter	Quarter	Quarter	Total

VOH cost per tire
Budgeted VOH
Budgeted FOH
Depreciation
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 cost of goods sold budget, calculate the projected manufacturing cost per tire for 2017.

(Round all amounts to the nearest cent.)

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Total projected manufacturing cost per tire for 2017

Now prepare the cost of goods sold budget.

Review the sales budget you prepared above.

Review the production budget you prepared above.

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Grayson Tire Company
Cost of Goods Sold Budget
For the Year Ended December 31, 2017
	First	Second	Third	Fourth
	Quarter	Quarter	Quarter	Quarter	Total

Tires produced and sold in 2017
Total budgeted cost of goods sold

Prepare the selling and administrative expense budget.

Review the sales budget you prepared above.

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Grayson Tire Company
Selling and Administrative Expense Budget
For the Year Ended December 31, 2017
	First	Second	Third	Fourth
	Quarter	Quarter	Quarter	Quarter	Total





Total budgeted selling and administrative expense

Prepare the cash receipts budget. (If a box is not used in the table leave the box empty; do not enter a zero.)

Review the sales budget you prepared above.

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Cash Receipts from Customers
	First	Second	Third	Fourth
	Quarter	Quarter	Quarter	Quarter	Total
Total sales
	First	Second	Third	Fourth
		Quarter	Quarter	Quarter	Quarter	Total
Cash Receipts from Customers:
Accounts Receivable balance, December 31, 2016
1st Qtr.—Cash sales
1st Qtr.—Credit sales, collection of Qtr. 1 sales in Qtr. 1
1st Qtr.—Credit sales, collection of Qtr. 1 sales in Qtr. 2
2nd Qtr.—Cash sales
2nd Qtr.—Credit sales, collection of Qtr. 2 sales in Qtr. 2
2nd Qtr.—Credit sales, collection of Qtr. 2 sales in Qtr. 3
3rd Qtr.—Cash sales
3rd Qtr.—Credit sales, collection of Qtr. 3 sales in Qtr. 3
3rd Qtr.—Credit sales, collection of Qtr. 3 sales in Qtr. 4
4th Qtr.—Cash sales
4th Qtr.—Credit sales, collection of Qtr. 4 sales in Qtr. 4
Total cash receipts from customers

Accounts Receivable balance, December 31, 2017:
4th Qtr.—Credit sales, collection of Qtr. 4 sales
in Qtr. 1 of 2018

Prepare the cash payments budget. (Round all amounts you entered into the budget to the nearest whole dollar. If a box is not used in the table leave the box empty; do not enter a zero.)

Review the direct materials budget you prepared above.

Review the direct labor budget you prepared above.

Review the manufacturing overhead budget you prepared above.

Review the selling and administrative expense budget you prepared above.

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Cash Payments
	First	Second	Third	Fourth
	Quarter	Quarter	Quarter	Quarter	Total
Total direct materials purchases
	First	Second	Third	Fourth
		Quarter	Quarter	Quarter	Quarter	Total
Cash Payments
Direct Materials:
Accounts Payable balance, December 31, 2016
1st Qtr.—Qtr. 1 direct material purchases paid in Qtr. 1
1st Qtr.—Qtr. 1 direct material purchases paid in Qtr. 2
2nd Qtr.—Qtr. 2 direct material purchases paid in Qtr. 2
2nd Qtr.—Qtr. 2 direct material purchases paid in Qtr. 3
3rd Qtr.—Qtr. 3 direct material purchases paid in Qtr. 3
3rd Qtr.—Qtr. 3 direct material purchases paid in Qtr. 4
4th Qtr.—Qtr. 4 direct material purchases paid in Qtr. 4
Total payments for direct materials

Direct Labor:
Total payments for direct labor
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Manufacturing Overhead:


Total payments for manufacturing overhead

Selling and Administrative Expenses:




Total payments for Selling and Admin. expenses

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Income Taxes:
Total payments for income taxes

Capital Expenditures:
Total payments for capital expenditures

Total cash payments (before interest)

Accounts Payable balance, December 31, 2017:
4th Qtr.—Qtr. 4 direct material purchases
paid in Qtr. 1 of 2018

Prepare the cash budget. (Complete all input boxes. Enter a "0" for any zero balances. Round all amounts entered into the cash budget to the nearest whole dollar. Enter a cash deficiency, principal repayments, and/or a net repayment on financing with a minus sign or parentheses.)

Review the cash receipts budget you prepared above.

Review the cash payments budget you prepared above.

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Grayson Tire Company
Cash Budget
For the Year Ended December 31, 2017
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	First
	Quarter
Beginning cash balance
Cash receipts
Cash available
Cash payments:
Capital expenditures
Purchases of direct materials
Direct labor
Manufacturing overhead
Selling and administrative expenses
Income taxes
Interest expense
Total cash payments
Ending cash balance before financing
Minimum cash balance desired
Projected cash excess (deciency)
Financing:
Borrowing
Principal repayments
Total effects of financing
Ending cash balance

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Second
Quarter




















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Third

Quarter

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Fourth
Quarter




















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Total

Requirement 2.

Prepare Grayson's annual financial budget for 2017, including budgeted income statement, budgeted balance sheet, and budgeted statement of cash flows.

Begin with the budgeted income statement. (Complete all input boxes. Enter a "0" for any zero balances.)

Review the sales budget you prepared above.

Review the cost of goods sold budget you prepared above.

Review the selling and administrative expense budget you prepared above.

Review the cash budget you prepared above.

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Grayson Tire Company
Budgeted Income Statement
For the Year Ended December 31, 2017
Sales Revenue
Cost of Goods Sold
Gross Profit
Selling and Administrative Expenses
Operating Income
Interest Expense
Income before Income Taxes
Income Tax Expense
Net Income

Prepare the budgeted balance sheet. (Round to the nearest whole dollar.)

Review the production budget you prepared above.

Review the direct materials budget you prepared above.

Review the selling and administrative expense budget you prepared above.

Review the cash receipts budget you prepared above.

Review the cash payments budget you prepared above.

Review the cash budget you prepared above.

Review the income statement you prepared above.

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Grayson Tire Company
Budgeted Balance Sheet
December 31, 2017
Assets
Current Assets:
Cash
Accounts Receivable
Raw Materials Inventory
Finished Goods Inventory
Total Current Assets
Property, Plant, and Equipment:
Equipment
Less: Accumulated Depreciation
Total Assets
Liabilities
Current Liabilities:
Accounts Payable
Stockholders' Equity
Common Stock, no par
Retained Earnings
Total Stockholders' Equity
Total Liabilities and Stockholders' Equity

Prepare the budgeted statement of cash flows. (Enter a use of cash with a minus sign or parentheses. Complete all input boxes. Enter a "0" for any zero balances.)

Review the cash budget you prepared above.

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Grayson Tire Company
Budgeted Statement of Cash Flows
For the Year Ended December 31, 2017
Operating Activities:
Cash receipts from customers
Cash payments for operating expenses
Cash payments for interest expense
Cash payments for income taxes
Net cash provided by (used for) operating activities
Investing Activities:
Cash payments for equipment purchases
Net cash used for investing activities
Financing Activities:
Proceeds from issuance of notes payable
Payment of notes payable
Net cash provided by financing activities
Net increase in cash
Cash balance, January 1, 2017
Cash balance, December 31, 2017