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Problem 21-1A (Part Level Submission) Cook Farm Supply Company manufactures and sells a pesticide called Snare. The following data are available for preparing budgets for
Problem 21-1A (Part Level Submission) 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, 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 $3.8 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) 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 $14 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. (a) (a) Your answer is correct. Prepare the sales budget. COOK FARM SUPPLY COMPANY Sales Budget For the Six Months Ending June 30, 2017 Quarter Six Months Expected unit sales 28000 71000 43000 Unit selling price 61 61 61 $1 1708000 2623000 4331000 Total sales COOK FARM SUPPLY COMPANY Production Budget For the Six Months Ending June 30, 2017 Quarter Six 2 Months Expected Unit Sales 28000 43000 Add + Desired Ending Finished Goods Units 12400 18400 Total Required Units 40400 61400 Less + Beginning Finished Goods Units 12400 8100 Required Production Units 32300 49000 81300 Click if you would like to Show Work for this question: Open Show Work Prepare the direct materials budget. (Round Cost per pound answers to 2 decimal places, e.g. 52.70.) COOK FARM SUPPLY COMPANY Direct Materials Budget-Gumm For the Six Months Ending June 30, 2017 Quarter Six Months Units to be Produced 49000 32300 Direct Materials per Unit Total Pounds Needed for Production 161500 245000 Add + Desired Ending Direct Materials 10400 13500 Total Materials Required 171900 258500 Less + Beginning Direct Materials 9200 10400 Direct Materials Purchases 162700 248100 3.80 3.80 Cost per Pound $4 Total Cost of Direct Materials Purchases + 1561040 618260 942780 $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.) COOK FARM SUPPLY COMPANY Direct Labor Budget For the Six Months Ending June 30, 2017 Quarter Six Months Units to be Produced 32300 49000 Direct Labor Time per Unit 0.25 0.25 Total Required Direct Labor Hours 8075 12250 14.00 14.00 Direct Labor Cost per Hour $4 284550 113050 171500 Total Direct Labor Cost Prepare the selling and administrative expense budget. COOK FARM SUPPLY COMPANY Selling and Administrative Expense Budget For the Six Months Ending June 30, 2017 Quarter Six Months 28000 Budgeted sales in units + 43000 71000 Variable Cost 256200 393450 649650 Fixed Cost 177000 177000 354000 433200 570450 1003650 Total (c) 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.) COOK FARM SUPPLY COMPANY Budgeted Income Statement $4
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