Glendo Farm Supply Company manufactures and sells a pesticide called Snare. The

Question

Glendo 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 2014.

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 150% of direct labor cost. (2) The direct materials budget for Tarr shows the cost of Tarr purchases to be $299,000 in quarter 1 and $425,000 in quarter 2.

1. Sales: Quarter 1, 29,800 bags; quarter 2, 42,900 bags. Selling price is $61 per bag. 2. Direct materials: each bag of Snare requires 4 pounds of Gumm at a cost of $3.80 per pound and 8 pounds of Tarr at $1.50 per pound. 3. Desired inventory levels:

Explanation / Answer

A production budget is provided as the solution. The question is not fully written to understand the requirement. However, the material purchase value calculated by the assistant seems to be wrong.

Quarter 1 Quarter 2 Product Type Rate per unit Quantity Value Rate per unit Quantity Value Snare(bags) Sales 61 129800 7917800 61 242900 14816900 Closing Stock 12300 18100 Opening Stock -8200 -12300 Production required 133900 248700 Gumm Pounds required for production(133900*4)(248700*4) 3.8 535600 2035280 3.8 994800 3780240 Closing Stock 10200 13300 Opening Stock -9200 -10200 Purchase required(production + closing - opening stock) 3.7 536600 1985420 3.8 997900 3792020 Tarr Pounds required for production(133900*8)(248700*8) 1.5 1071200 1606800 1.5 1989600 2984400 Closing Stock 20300 25300 Opening Stock -14500 -20300 Purchase required(production + closing - opening stock) 1.5 1077000 1615500 1.5 1994600 2991900

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