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Case Study Caprie Pets Food Company manufactures and sells dog food called Caprie Supreme. The following data are available for preparing budgets for Caprie Supreme

Case Study

Caprie Pets Food Company manufactures and sells dog food called Caprie Supreme. The following data are available for preparing budgets for Caprie Supreme for the first 2 quarters of 2019.

  1. Sales: quarter 1 40,000 bags; quarter 2 50,000 bags. Selling price is $63 per bag.
  2. Direct materials: each bag of Caprie Supreme requires 5 pounds of protein at a cost of $3.80 per pound and 10 pounds of carbohydrates at $1.50 per pound.
  3. Desired inventory levels:

Type of Inventory

January 1

April 1

July 1

Bags

10,000

15,000

20,000

Protein (pounds)

9,000

12,000

15,000

Carbohydrates (pounds)

15,000

20,000

25,000

  1. Direct labour: direct labour time is 15 minutes per bag at an hourly rate of $12 per hour.
  2. Interest expense is $70,000.
  3. Income taxes are expected to be 30% of income before income taxes.

The direct labour budget shows expected costs to be $135,000 in quarter 1 and 165,000 in quarter 2. The selling and administrative expenses budget show expected costs to be $402,000 in quarter 1 and $465,000 in quarter 2. The manufacturing overhead budget shows expected costs to be 100% of direct labour cost. The direct materials budget for carbohydrates shows the cost of carbohydrates to be $682,500 in quarter 1 and $832,500 in quarter 2.

Instructions:

  1. Prepare the sales budget for the first 6 months of 2019 by quarters.
  2. Prepare the production budget for the first 6 months of 2019 by quarters.
  3. Prepare the direct materials budget for the first 6 months of 2019 by quarters.
  4. Prepare the budgeted income statement for the first 6 months of 2019.

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