Problem 21-1A (Part Level Submission) Cook Farm Supply Company manufactures and

Question

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, 28,000 bags; quarter 2, 43,300 bags. Selling price is $63 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: Type of Inventory January 1 April 1 July 1 Snare (bags) 8,400 12,500 18,400 Gumm (pounds) 9,500 10,300 13,400 Tarr (pounds) 14,500 20,100 25,100 4. Direct labor: direct labor time is 15 minutes per bag at an hourly rate of $14 per hour. 5. Selling and administrative expenses are expected to be 15% of sales plus $177,000 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 $424,500 in quarter 2.

Explanation / Answer

Solution a:

Sales Budget - Cook Farm Supply Company Particulars Q1 Q2 6 Months Sales units 28000 43300 71300 Selling price per unit $63.00 $63.00 $63.00 Budgeted Sales Revenue $1,764,000.00 $2,727,900.00 $4,491,900.00

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