Cook Farm Supply Company manufactures and sells a pesticide called Snare. The fo
ID: 2479228 • 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 direct materials budget, b) prepare direct labor budget , c) prepare the selling and administrative 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
Quarter Ist Quarter II nd Sales Quarter snare 28600 42600 Add: Closing reuired 12100 18500 Less : Opening 8200 12100 Net for require for Months 32500 49000 Gum required (in pounds) 162,500 245,000 tarr (pounds) 195,000 294,000 Gum Closing Balace required 10300 13400 Gum opening Balace 9400 10300 Net Purcahse require 163,400 248,100 Cost per Pound 3.8 3.8 Total Budget Purchase 620,920 942,780 Tarr Closing Balace required 20100 25500 tarr opening Balace 14500 20100 Net Purcahse require 200,600 299,400 Cost per Pound 1.75 1.75 Total Budget Purchase 351,050 523,950 Totel Direct material Purchase Budget 971,970 1,466,730 Direct Labour Budget Quarter Ist Quarter II nd Sales Quarter snare 28600 42600 Add: Closing reuired 12100 18500 Less : Opening 8200 12100 Net for require for Months 32500 49000 Time per bags in mnts 15 15 Total Time required in hour 8125 12250 Per hour labour rate 16 16 Total Budget for labour Cost 130000 196000 Selling & Administrative Budget Sales Quarter snare 28600 42600 Sale price 63 63 Total Sale 1801800 2683800 Variable Selling & Administrative @ 15% of sale 270,270 402,570 Fixed Cost 176,000 176,000 Total Selling & Administrative Budget 446,270 578,570