CALCULATOR FULL SCREEN PRINTER VERSION BACK NEXT Problem 21-1A Cook 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 2017. 1. Sales: quarter 1, 28,400 bags; quarter 2, 44,000 bags. Selling price is $62 per bag. Direct materials: each bag of Snare requires 4 pounds of Gumm at a cost of $3.8 per pound and 6 pounds of Tarr at 2. $1.50 per pound. 3. Desired inventory levels: April 1 January 1 July 1 Type of Inventory Snare (bags) 8,100 12,500 18,300 13,100 9,100 10,400 Gumm (pounds) 25,400 14,300 20,200 Tarr (pounds) 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 $180,000 per quarter 6. Interest expense is $100,000. 7. Income taxes are expected to be 30 % of income before income taxes. Your assistant has prepared two budgets: (1) the manufacturing overhead budget shows expected costs to be 125% of direct labor cost, and (2) the direct materials budget for Tarr shows the cost of Tarr purchases to be $301.000 in quarter 1 and $427.500 in quarter 2. Your answer is correct. COOK FARM SUPPLY COMPANY Budgeted Income Statement For the Six Months Ending June 30, 2017 Sales 4488800 Cost of Goods Sold 2367480 X Gross Profit 2166570 Selling and Administrative Expenses 1033320 Income from Operations 1133250 Interest Expense 100000 1033250 Income Before Income Tax 309975 Income Tax Expense 723275 Net Income / (Loss)