Danner Farm Supply Company manufactures and sells a pesticide called Snare. The following data are available for

Question:

Danner Farm Supply Company manufactures and sells a pesticide called Snare. The following data are available for preparing budgets for Snare for the first 2 quarters of 2011.

1. Sales: Quarter 1, 28,000 bags; quarter 2, 42,000 bags. Selling price is $60 per bag.

2. Direct materials: Each bag of Snare requires 4 pounds of Gumm at a cost of $4 per pound and 6 pounds of Tarr at $1.50 per pound.

3. Desired inventory levels:

Type of Inventory Snare (bags) Gumm (pounds) Tarr (pounds) January 1 April 1 12,000 10,000 20,000 July 1 8,000 13,000 25

4. Direct labor: Direct labor time is 15 minutes per bag at an hourly rate of $14 per hour.

5. Selling and administrative expenses are expected to be 15% of sales plus $175,000 per quarter.

6. Income taxes are expected to be 30% of income from operations.

Your assistant has prepared two budgets: (1) The manufacturing overhead budget shows expected costs to be 150% of direct labor cost. (2) The direct materials budget for Tarr shows the cost of Tarr purchases to be $297,000 in quarter 1 and $421,500 in quarter 2.


Instructions

Prepare the budgeted income statement for the first 6 months and all required supporting budgets by quarters. Do not prepare the manufacturing overhead budget or the direct materials budget for Tarr.

Fantastic news! We've Found the answer you've been seeking!

Step by Step Answer:

Related Book For  book-img-for-question
Question Posted: