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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, 29,400 bags; quarter 2, 42,500 bags. Selling price is $63 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 $1.75 per pound 3. Desired inventory levels: Type of Inventory January 1 April 1 July 1 Snare (bags) Gumm (pounds) Tarr (pounds) 8,100 9,500 14,200 12,200 10,100 20,500 18,100 13,200 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 $179,000 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 $426,500 in quarter 2
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