1 P22.1 Prepare budgeted income statement and supporting budgets. 2 3 Cook Farm Supply Company manufactures and sells a pesticide called Snare. The 4 following data are available for preparing budgets for Snare for the first 2 quarters of 2025. 5 6 1. Sales: quarter 1, 40,000 bags; quarter 2, 56,000 bags. Selling price is $60 per bag. 7 8 9 2. Direct materials: each bag of Snare requires 4 pounds of Gumm at a cost of $3.80 per pound and 6 pounds of Tarr at $1.50 per pound. 3. Desired inventory levels: 10 11 Type of Inventory 12 Snare (bags)) January 1 8,000 April 1 July 1 15,000 18,000 13 Gumm (pounds) 9,000 10,000 13,000 14 Tarr (pounds) 14,000 20,000 25,000 15 16 4. Direct labor: direct labor time is 15 minutes per bag at an hourly rate of $16 per hour. 17 5. 18 19 6. Interest expense is $100,000. Selling and administrative expenses are expected to be 15% of sales plus $175,000 per quarter. 20 7. Income taxes are expected to be 20% of income before income taxes. 21 22 Your assistant has prepared two budgets: (1) the manufacturing overhead budget shows expected costs to be 125% of 23 direct labor cost, and (2) the direct materials budget for Tarr shows the cost of Tarr purchases to be $297,000 in quarter 24 1 and $439,500 in quarter 2. 25 26 Instructions 27 Prepare the budgeted multiple-step income statement for the first 6 months and all required operating budgets by 28 quarters. (Note: Use variable and fixed in the selling and administrative expense budget.) Do not prepare the 29 manufacturing overhead budget or the direct materials budget for Tarr. 30 31 32 NOTE: Enter a formula, a cell reference, or a value (if you are unable to reference a cell), into the 33 yellow shaded input cells. 34. 35 36 37 38 39 COOK FARM SUPPLY COMPANY Sales Budget For the Six Monthe Findina Tur Expected unit sales Unit selling price Total sales COOK FARM SUPPLY COMPANY Sales Budget For the Six Months Ending June 30, 2025 Quarter Six 2 Months 40,000 56,000 S 60 S 60 $ S 2,400,000 $ 3,360,000 Expected unit sales COOK FARM SUPPLY COMPANY Production Budget For the Six Months Ending June 30, 2025 Quarter Six 1 2 Months 44,000 62,000 7,000 18,000 51,000 80,000 8,000 15,000 43,000 65,000 Add: Desired ending finished goods units Total required units Less: Beginning finished goods units Required production units Units to be produced Direct materials per unit (lbs.) COOK FARM SUPPLY COMPANY Direct Materials Budget - Gumm For the Six Months Ending June 30, 2025 Total pounds needed for production Add: Desired ending direct materials (lbs.) Total materials required Less: Beginning direct materials (lbs.) Quarter Six 1 2 Months x 4 lbs. x 4 lbs. Direct materials purchases Cost per pound S 3.80 $ 3.80 Total cost of direct materials purchases B 60 Units to be produced Direct labor hours per unit Total required direct labor hours Direct labor cost per hour Total direct labor cost Budgeted sales in units Variable (.15 x sales) Fixed Total COOK FARM SU Direct Labor Budget For the Six Months Ending June 30, 2025 Quarter Six 1 2 Months 43,000 65,000 900.00 900.00 10,750 16,250 SS $ 16.00 $ 16.00 172,000 $ 260,000 COOK FARM SUPPLY COMPANY Selling and Administrative Budget For the Six Months Ending June 30, 2025 Quarter Six 1 2 Months Sales revenue Cost of goods sold Gross Profit COOK FARM SUPPLY COMPANY Budgeted Income Statement For the Six Months Ending June 30, 2025 Selling and administrative expenses Income from operations Interest expense Income before income tax Income tax expense (20%) Net income Cost per bag Cost element Unit Cost Total Direct materials Gumm Tarr Direct labor Manufacturing overhead (125% of direct labor cost) Total 55