Cook Farm Supply Company manufactures and sells a pesticide called Snare. The fo
ID: 2482912 • 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.
Prepare the budgeted multi-step income statement for the first six months
sales, 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
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
Income Statement Sales (unit) 71200 Sale value @ $ 63 4485600 Less: Cost of Goods sold Direct Material (Gumm) 5*3.80*71200 1352800 (Tarr) 6*1.75*71200 747600 2100400 Labor 0.25*16*71200 284800 Mfg Overhead 284800*125% 356000 Total Cost of goods sold 2741200 Gross Profit 1744400 Selling & Administrative Exp Variable 15% of Sales 672840 Fixed 176000 per quarter 176000*2 352000 Total Selling & Admin Exp. 1024840 Income From Operation 719560 Interest Expenses 100000 Income before income tax 619560 Income Tax @ 30% 185868 Net Income/Loss 433692