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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.)

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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.)

image text in transcribed

Prepare the selling and administrative expense budget. COOK FARM SUPPLY COMPANY Selling and Administrative Expense Budget Quarter Six Months

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