Question
Problem 9-1A Cook Farm Supply Company manufactures and sells a pesticide called Snare. The following data are available for preparing budgets for Snare for the
Problem 9-1A
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, 29,400 bags; quarter 2, 42,500 bags. Selling price is $63 per bag. | |
2. | Direct materials: each bag of Snare requires 4 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 | 12,200 | 18,100 | |||
Gumm (pounds) | 9,500 | 10,100 | 13,200 | |||
Tarr (pounds) | 14,200 | 20,500 | 25,400 |
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 $179,000 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 $301,000 in quarter 1 and $426,500 in quarter 2. (Note: Do not prepare the manufacturing overhead budget or the direct materials budget for Tarr.)
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.)
Prepare the selling and administrative expense budget. COOK FARM SUPPLY COMPANY Selling and Administrative Expense Budget Quarter Six Months
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