Problem 9-1A (Part Level Submission) (Video)

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 2020.

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 $3.80 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)		8,100		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 $16 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. (Note: Do not prepare the manufacturing overhead budget or the direct materials budget for Tarr.)

Prepare the sales budget. COOK FARM SUPPLY COMPANY Sales Budget For the Six Months Ending June 30, 2020 Quarter Six Months 1 2 Expected Unit Sales 28000 43000 71000 Unit Selling Price 61 61 61 Total Sales 1708000 2623000 4331000 Prepare the production budget. COOK FARM SUPPLY COMPANY Production Budget For the Six Months Ending June 30, 2020 Quarter Six Months 1 2 > Expected Unit Sales 28000 43000 Add Desired Ending Finished Goods Units 12400 18400 > Total Required Units 40400 61400 Less Beginning Finished Goods Units 8100 12400 Required Production Units 32300 49000 81300 Your answer is correct. 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, 2020 Quarter Six Months 1 2 Units to be produced 32300 49000 > Direct Materials per Unit 5 Total Pounds Needed for Production 161500 245000 Add Desired Ending Direct Materials (Pounds) 10400 13500 Total Materials Required 171900 258500 Less Beginning Direct Materials (Pounds) 9200 10400 Direct Materials Purchases 162700 248100 Cost per Pound 3.80 3.80 $1 Total Cost of Direct Materials Purchases 618260 942780 1561040 COOK FARM SUPPLY COMPANY Direct Labor Budget For the Six Months Ending June 30, 2020 Quarter Six Months 1 2 Units to be produced 32300 49000 Direct Labor Time (Hours) per Unit 0.25 0.25 Total Required Direct Labor Hours 8075 12250 Direct Labor Cost per Hour 16 16 Total Direct Labor Cost 129200 196000 325200 Prepare the selling and administrative expense budget. COOK FARM SUPPLY COMPANY Selling and Administrative Expense Budget For the Six Months Ending June 30, 2020 Quarter Six Months 1 2 Budgeted Sales in Units 28000 43000 71000 Variable Expenses 256200 393450 649650 Fixed Expenses 177000 177000 354000 Total Selling and Administrative Expenses 433200 570450 1003650 (c) Your answer is partially correct. Try again. Prepare the budgeted multiple-step income statement for the first 6 months. decimal places and final answer to 0 decimal places, e.g. 1,255.) COOK FARM SUPPLY COMPANY Budgeted Income Statement For the Six Months Ending June 30, 2020 Sales 4331000 Cost of Goods Sold Gross Profit Selling and Administrative Expenses Income from Operations > Interest Expense Income Before Income Tax Income Tax Expense Net Income / (Loss)