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 2020.
1. | Sales: quarter 1, 28,000 bags; quarter 2, 43,000 bags. Selling price is $61 per bag. | |
2. | Direct materials: each bag of Snare requires 5 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) | 8,100 | 12,400 | 18,400 | |||
Gumm (pounds) | 9,200 | 10,400 | 13,500 | |||
Tarr (pounds) | 14,400 | 20,300 | 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 $177,000 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 $302,000 in quarter 1 and $427,500 in quarter 2. (Note: Do not prepare the manufacturing overhead budget or the direct materials budget for Tarr.)
1- Prepare the sales budget.
2- Prepare the production budget.
3- Prepare the direct materials budget. (Round Cost per pound answers to 2 decimal places, e.g. 52.70.)
4- Prepare the direct labor budget. (Enter Direct labor time per unit in proportion to hours, e.g. for 45 minutes the proportion will be 0.75.)
5- Prepare the budgeted multiple-step income statement for the first 6 months. (Round intermediate calculations to 2 decimal places and final answer to 0 decimal places, e.g. 1,255.)
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