Answered step by step
Verified Expert Solution
Question
1 Approved Answer
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 2020. 1. Sales: quarter 1, 28,400 bags; quarter 2, 42,600 bags. Selling price is $61 per bag. 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 $1.75 per pound. 3. Desired inventory levels: Type of Inventory January 1 April 1 July 1 Snare (bags) 8,400 12,300 18,100 Gumm (pounds) 9,200 10,200 13,400 Tarr (pounds) 14,500 20,200 25,300 4. Direct labor: direct labor time is 15 minutes per bag at an hourly rate of $16 per hour. 5. Selling and administrative expenses are expected to be 15% of sales plus $176,000 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 $303,000 in quarter 1 and $425,500 in quarter 2. (Note: Do not prepare the manufacturing overhead budget or the direct materials budget for Tarr.) Sales COOK FARM SUPPLY COMPANY Budgeted Income Statement For the Six Months Ending June 30, 2020 Cost of Goods Sold Gross Profit Selling and Administrative Expenses Income from Operations Income Before Income Tax Income Tax Expense Net Income (Loss) +A 1732400
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