Mercer Farm Supply Company manufactures and sells a fertilizer called Basic II. The following data are available

Question:

Mercer Farm Supply Company manufactures and sells a fertilizer called Basic II. The following data are available for preparing budgets for Basic II for the first 2 quarters of 2014.

1 Sales: quarter 1, 40,000 bags; quarter 2, 50,000 bags. Selling price is $63 per bag.

2 Direct materials: each bag of Basic II requires 5 pounds of Crup at a cost of $3.80 per pound and 10 pounds of Dert at $1.50 per pound.

3 Desired inventory levels:

Type of Inventory January 1 April 1 July 1 Basic II (bags) 10,000 15,000 20,000 Crup (pounds) 9,000 12,000 15,000 Dert (pounds) 15,000 20,000 25,000 4 Direct labor: direct labor time is 15 minutes per bag at an hourly rate of $12 per hour.

5 Selling and administrative expenses are expected to be 10% of sales plus $150,000 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 100% of direct labor cost. (2) The direct materials budget for Dert which shows the cost of Dert to be $682,500 in quarter 1 and $832,500 in quarter 2.

Instructions Prepare the budgeted income statement for the first 6 months of 2014 and all required supporting budgets by quarters. (Note: Use variable and fixed in the selling and administrative expense budget.) Do not prepare the manufacturing overhead budget or the direct materials budget for Dert.

AppendixLO1

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

Step by Step Answer:

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