Prepare budgeted income statement and supporting budgets.
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, 40,000 bags; quarter 2, 56,000 bags. Selling price is $60 per bag.
2. Direct labor: direct labor time is 15 minutes per bag at an hourly rate of $16 per hour.
3. Direct Materials cost per bag of Snare is $24.20
5. Selling and administrative expenses are expected to be 15% of sales plus fixed expenses of $175,000 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 the manufacturing overhead budget shows expected
costs to be 125% of direct labor cost.
8	Inventory facts:
Type of Inventory	1/1/17	4/1/17	7/1/17
Snare (bags)	8,000	15,000	18,000
Remember that beginning inventory in a period is equal to the ending inventory in the prior period
Instructions
Prepare the budgeted multi-step income statement for the first 6 months and all required operating budgets by
quarters. (Note: Use variable and fixed in the selling and administrative expense budget.) Do not
prepare the manufacturing overhead budget or the direct materials budget for Tarr.
	PLEASE INCLUDE ALL FORMULAS
COOK FARM SUPPLY COMPANY
Sales Budget
For the Six Months Ending June 30, 2017
		Quarter		Six
		1	2	Months
Expected unit sales
Unit selling price		$60	$60	$60
Total sales
Production Budget
For the Six Months Ending June 30, 2017
		Quarter		Six
		1	2	Months
Expected unit sales
Add: Desired ending finished goods units
Total required units
Less: Beginning finished goods units
Required production units
Direct Labor Budget
For the Six Months Ending June 30, 2017
		Quarter		Six
		1	2	Months
Units to be produced		50
Direct labor hours per unit		0.25	0.25
Total required direct labor hours
Direct labor cost per hour		$16	$16
Total direct labor cost
Selling and Administrative Budget
For the Six Months Ending June 30, 2017
		Quarter		Six
		1	2	Months
Budgeted sales
Variable (.15 x sales)
Fixed
Total
Budgeted Income Statement
For the Six Months Ending June 30, 2017
Sales revenue
Cost of goods sold
Gross Profit
Selling and administrative expenses
Income from operations
Interest expense
Income before income tax
Income tax expense (30%)
Net income
	Cost per Bag needed to compute COST OF GOODS SOLD
	Cost Element	Quantity	Unit Cost	Total
	Direct Materials	1
	Direct Labor	1/4 hour
	Manufacturing overhead
	(125% of direct labor cost)
	Total