Cook Farm Supply Company manufactures and sells a pesticide called Snare. The fo
ID: 2543415 • 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 $301,000 in quarter 1 and $427,500 in quarter 2.
Prepare seperate sales, production, direct materials, direct labor, selling and administrative expense budgets and the budgeted multi step income statement for the first 6 months.
1. Sales: quarter 1, 28,400 bags; quarter 2, 44,000 bags. Selling price is $62 per bag. 2. Direct materials: each bag of Snare requires 4 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:Explanation / Answer
Required budgets are as prepared below:
Cook farm Supply Company Sales Budget For the Six Months Ending June 30, 2017 Quarter Six 1 2 Months Expected unit sales 28,400 44,000 72,400 Unit selling price $62 $62 $62 Total sales $1,760,800 $2,728,000 $4,488,800 Cook farm Supply Company Production Budget For the Six Months Ending June 30, 2017 Quarter Six 1 2 Months Expected unit sales 28,400 44,000 72,400 Add: Desired ending finished goods units 12,500 18,300 18,300 Total required units 40,900 62,300 90,700 Less: Beginning finished goods units 8,100 12,500 8,100 Required production units 32,800 49,800 82,600 Cook farm Supply Company Direct Materials Budget - Gumm For the Six Months Ending June 30, 2017 Quarter Six 1 2 Months Units to be produced 32,800 49,800 82,600 Direct materials per unit (pounds) 4 4 5 Total pounds needed for production 131,200 199,200 413000 Add: Desired ending direct materials (pounds) 14,300 13,100 13,100 Total materials required 145,500 212,300 426,100 Less: Beginning direct materials (pounds) 9,100 14,300 9,100 Direct materials purchases 136,400 198,000 417,000 Cost per pound 3.8 3.8 3.8 Total cost of direct materials purchases $518,320 $752,400 $1,584,600 Cook farm Supply Company Direct Labor Budget For the Six Months Ending June 30, 2017 Quarter Six 1 2 Months Units to be produced 32,800 49,800 82,600 Direct labor hours per unit 0.25 0.25 0.25 Total required direct labor hours 8,200 12,450 20,650 Direct labor cost per hour 14 14 14 Total direct labor cost $114,800 $174,300 $289,100 Cook farm Supply Company Selling and Administrative Budget For the Six Months Ending June 30, 2017 Quarter Six 1 2 Months Budgeted sales 1,760,800 2,728,000 4,488,800 Variable (.15 x sales) $ 264,120 $ 409,200 $ 673,320 Fixed 180,000 180,000 180,000 Total $ 444,120 $ 589,200 $ 853,320 Cook farm Supply Company Budgeted Income Statement For the Six Months Ending June 30, 2017 Sales revenue $ 4,488,800 Cost of goods sold 72,400*32.075) 2,322,230 Gross Profit 2,166,570 Selling and administrative expenses 853,320 Income from operations 1,313,250 Interest 100,000 Income less interest 1,213,250 Income tax expense (30%) 363,975 Net income $ 949,275 direct material 4*3.8 +6* 1.5= 24.2 Direct labour .25*14 = 3.5 manufacturing overhead = 125% of 3.5 = 4.375 Cost per unit 32.075