Problem 21-1A (Part Level Submission)

Glendo 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 2014.

1.		Sales: Quarter 1, 29,500 bags; quarter 2, 42,800 bags. Selling price is $62 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)		8,300		12,400		18,300
Gumm (pounds)		9,400		10,400		13,400
Tarr (pounds)		14,200		20,500		25,400

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 $179,000 per quarter.
6.		Income taxes are expected to be 30% of income from operations.

Your assistant has prepared two budgets: (1) The manufacturing overhead budget shows expected costs to be 150% of direct labor cost. (2) The direct materials budget for Tarr shows the cost of Tarr purchases to be $298,000 in quarter 1 and $426,000 in quarter 2.

1) Create Direct Materials budget 2) Create Direct Labor Budget 3) Prepare the Selling and Admin Budget