Problem 21-1A (Part Level Submission) Type of Inventory January 1 April 1 July 1

Question

Problem 21-1A (Part Level Submission)

Type of Inventory

January 1

April 1

July 1

(a)

Quarter

Six
Months

1

2

Quarter

Six
Months

1

2

Open Show Work

Problem 21-1A (Part Level Submission)

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.
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:

Type of Inventory

January 1

April 1

July 1

Snare (bags) 8,200 12,100 18,500 Gumm (pounds) 9,400 10,300 13,400 Tarr (pounds) 14,500 20,100 25,500 4. Direct labor: direct labor time is 15 minutes per bag at an hourly rate of $16 per hour. 5. Selling and administrative expenses are expected to be 15% of sales plus $176,000 per quarter. 6. Interest expense is $100,000. 7. Income taxes are expected to be 30% of income before income taxes.
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.

Explanation / Answer

Sales budget :

Production Budget :

1st quarter 2nd quarter Six months Expected unit sales 28600 42600 71200 Selling price per unit 63 63 63 Expected sales 1801800 2683800 4485600

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