NEX CES Problem 9-1A (Part Level Submission) Cook Farm Supply Compeny manufactur
ID: 2438747 • Letter: N
Question
NEX CES Problem 9-1A (Part Level Submission) Cook Farm Supply Compeny manufactures and sells a pesticde called Snare. The following data are avalable for preparing budgets for Snare for the first 2 quarters of 2017. 1. Sales: quarter 1, 28,600 bags; quarter 2, 43,400 bags. Selling price is $62 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: udy Type of Inventory January April July 1 Snare (bags) Gumm (pounds) Tarr (pounds) 8,400 12,300 18,300 9,400 10,500 13,500 14,300 20,400 25,100 4. Direct labor: direct labor time is 15 minutes per bag at an hourly rate of $16 per hour Seling and administrative expenses are expected to be 15% of sales plus $178,000 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 budget for Tarr shows the cost of Tarr purchases to be $299,000 in quarter 1 and $426,500 in quarter 2. expectedcosts to be 125% of direct labor cost, and (2) the direct materials (Note: Do not prepare the manufacturing overhead budget or the direct materials budget for Tarr) Your answer is correct Version 4.24. 4Explanation / Answer
Explanation =Production Budget :-
Quarter 1
Quarter 2
Six Months
Expected Unit Sales (bags)
28600
43400
72000
Add:- Desired Ending Finished Goods
12300
18300
30600
Total Required Units
40900
61700
102600
Less:- Beginning Finished Goods units
8400
12300
20700
Required Production Units
32500
49400
81900
Direct Materials Budget – Gumm :-
Quarter 1
Quarter 2
Six month
Units to be Produced
(Explanation as above)
32500
49400
Direct Materials per unit (Pound)
5
5
Total Pounds needed for production
162500
247000
Add:- Desired Ending Direct Material
10500
13500
Total Material Required
173000
260500
Less:- Beginning Direct Material
9400
10500
Direct Material Purchases
163600
250000
Cost per Pound ($)
3.8
3.8
Total cost of Direct Material Purchases ($)
621680
950000
1571680
Direct Labour Budget :-
Quarter 1
Quarter 2
Six month
Units to be Produced
(Explanation as above)
32500
49400
Direct Labour time per unit
(15 min/60min = 0.25 Hrs)
0.25
0.25
Total Required Direct Labour Hours
8125
12350
Direct Labour Cost per Hour ($)
16
16
Total Direct Labour Cost
130000
197600
327600
Selling & Admn Exp- Budget :-
Quarter 1
Quarter 2
Six month
Budgeted Sales Value
(28600 * 62)
=1773200
( 23400 * 62)
=1450800
3224000
Variable (15% * Sales)
265980
217620
483600
Fixed
178000
178000
356000
Total
443980
395620
839600
Quarter 1
Quarter 2
Six Months
Expected Unit Sales (bags)
28600
43400
72000
Add:- Desired Ending Finished Goods
12300
18300
30600
Total Required Units
40900
61700
102600
Less:- Beginning Finished Goods units
8400
12300
20700
Required Production Units
32500
49400
81900
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