Cook Farm Supply Company manufactures and sells a pesticide called Snare. The fo
ID: 2478564 • Letter: C
Question
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.
Type of Inventory
January 1
April 1
July 1
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 $300,000 in quarter 1 and $422,500 in quarter 2.
a) prepare a direct materials budget, b) prepare a direct labor budget, c) prepare the selling and administrative expense budget
1. Sales: quarter 1, 28,600 bags; quarter 2, 42,600 bags. Selling price is $63 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:Explanation / Answer
a) a direct materials budget:
b) a direct labor budget :
c) the selling and administrative expense budget:
Quarter 1 Quarter 2 Opening Balance of Snare 8200 12100 Less: Sales (units) 28600 42600 20400 30500 Add: Closing Balance of Snare 12100 18500 Production (units) 32500 49000 Gumm Tarr Gumm Tarr Opening Balance 9400 14500 10300 20100 Less: Required for Production 162500 195000 245000 294000 153100 180500 234700 273900 Add: Closing Balance 10300 20100 13400 25500 Purchases required 163400 200600 248100 248400 Cost of Purchases $620920 $351050 $942780 $434700