P7-2

Glide Tire Company's budgeted unit sales for the year 2008 were:

Passenger car tires 120,000

Truck tires 25,000

The budgeted selling price for truck tires was $200 per tire and for passenger car tires was $65 per tire. He beginning finished goods inventories was expected to be 2,000 truck tires and 5,000 passenger tires, for a total cost of $326,478, with desired ending inventories at 2,500 and 6,000, respectively, with a total cost of $400,510. There was no anticipated beginning or ending work in process inventory for either type of tire.

The standard materials quantities for each type of fire were as follows:

Truck Passenger

Car Rubber 30lbs 10 lbs

Steel belts 4 lbs 1.5 lbs

The purchase prices of rubber and steel were $2 and $3 per pound, respectively. The desired ending inventories for rubber and steel were 75,000 and 7,500 pounds respectively. The estimated beginning inventories for rubber and steel were 60,000 and 6,000 pounds, respectively.

The direct labor hours required for each type of tire were as follows:

Molding Department Finishing Department

Truck Tire 0.25 0.15

Passenger car tire 0.10 0.05

The direct labor rate for each department is as follows:

Molding department $15 per hour

Finishing department $13 per hour

Budgeted factory overhead costs for 2008 were as follows:

Indirect materials 198,500

Indirect labor 213,200

Depreciation of building and equipment 157,500

Power and light 122,900

Total 692,100

Required:

Prepare each of the following budgets for Glide for the year ended 2008:

1. Sales budget

2. Production budget

3. Direct material budget

4. Direct labor budget

5. Factory overhead budget

6. Cost of goods sold budget

 

P7-3

A listing of budgeted selling and administrative expenses for Glide Tire Company in P7-2 for the year ended December 31, 2008, were as follows:

Advertising expense 942,000

Office rent expense 125,000

Office salaries expense 821,000

Office supplies expense 45,500

Officers' salaries expense 661,000

Sales salaries expense 868,000

Telephone and fax expense 33,500

Travel expense 443,000

Required:

1. Prepare a selling and administrative expenses budget, in good form, for the year 2008.
2. Using the information above and the budgets prepared in P7-2, prepare a budgeted income statement for the year 2008, assuming an income tax rate of 40%.