Question
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
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, 29,800 bags; quarter 2, 42,400 bags. Selling price is $62 per bag.
2. 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 $1.50 per pound.
3. Desired inventory levels:
Type of Inventory | January 1 | April 1 | July 1 |
Snare (bags) | 8,300 | 12,400 | 18,100 |
Gumm(pounds) | 9,300 | 10,500 | 13,300 |
Tarr (pounds) | 14,300 | 20,400 | 25,400 |
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 $178,000 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 $300,000 in quarter 1 and $426,500 in quarter 2
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started