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 $301,000 in quarter 1 and $425,500 in quarter 2.
(Note: Do not prepare the manufacturing overhead budget or the direct materials budget for Tarr.)
1. Sales: quarter 1, 29,200 bags; quarter 2, 43,200 bags. Selling price is $61 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 $1.50 per pound. 3. Desired inventory levels: Cook Ham Supply Company manuractures and sells a pestioice called Snare. Ihe tollowing data are a ails cle or repanng cudgets or 5rare tor the tirst 2 quarters o 201 Sales: quarter 1, 29,200 bags; quarter 2, 43,200 begs. Se ng price is $61 per beg 2. Direct materials: each bag of Snare requires 5 pounds of Gumm at e cost of $3,8 per pound end 6 pounds of Teat $1.50 per poand 3. Desired inventory levels: Snare (hags) Gumm (pounds) Tarr (pounda) 8,400 9,200 18,200 10,200 20,400 25,400 4. Direct labar: direct Iaber time is 15 minutes per hag at an hourly rate of $14 per hour 5. Selling and administrative expenses are expected to be 1546 af sales plus s180,0d per quarter 6. Interest expensc is $100,oo. 7. Income taxes are expected ta be 3 of income befare income taxes ret mstenals hud et for lan sha s the ener of arr purehases to he $301 0 0 in qunr er 1 and S425 5DD1n quarter 2 Your st stant has prepared two hudgets: 1 the man? ct n g overi e d bud et snows expected costs t he 125?af direct lab r cott, end 2 the (Note: Do not prepare the maniufectuning everhend hudget or the direet matennls budget for Iam) Your answer ntstly o mort. Iryngnn. Prepare he sales budgel. COOK?ARM SUPPLY COM PAY Sale Duel Six Munths Expected uni ale Unit selling prive Tuial sales Prepare the production budgot
Explanation / Answer
1 Sales budget 1st quater 2nd quarter Six months Expected units sales 29200 43200 72400 Unit selling price 61 61 61 Total sales 1781200 2635200 4416400 2 Production budget 1st quater 2nd quarter Six months Budgeted sales 29,200 43200 Add Ending inventory 12200 18200 Total needs 41,400 61,400 Less beginning inventory 8400 12200 Units to be produced 33,000 49,200 82,200