Problem 23-1A Cook Farm Supply Company manufactures and sells a pesticide called

Question

Problem 23-1A 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, 29,500 bags; quarter 2, 43,900 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 12,300 18,100 Gumm (pounds) 9,300 10,100 13,300 Tarr (pounds) 14,300 20,300 25,200 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 $180,000 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 $423,500 in quarter 2. (Note: Do not prepare the manufacturing overhead budget or the direct materials budget for Tarr.) Prepare the sales budget. COOK FARM SUPPLY COMPANY Sales Budget Quarter Six Months 1 2 Expected unit sales Unit selling price $ $ $ Total sales $ $ $ Prepare the production budget. COOK FARM SUPPLY COMPANY Production Budget Quarter Six Months 1 2 : : Link to Text Link to Text Prepare the direct materials budget. (Round Cost per pound answers to 2 decimal places, e.g. 52.70.) COOK FARM SUPPLY COMPANY Direct Materials Budget—Gumm Quarter Six Months 1 2 : : $ $ $ $ $ Prepare the direct labor budget. (Enter Direct labor time per unit in proportion to hours, e.g. for 45 minutes the proportion will be 0.75.) COOK FARM SUPPLY COMPANY Direct Labor Budget Quarter Six Months 1 2 $ $ $ $ $ Prepare the selling and administrative expense budget. COOK FARM SUPPLY COMPANY Selling and Administrative Expense Budget Quarter Six Months 1 2 $ $ $ $ $ $ Link to Text Link to Text Prepare the budgeted multiple-step income statement for the first 6 months. (Round intermediate calculations to 2 decimal places and final answer to 0 decimal places, e.g. 1,255.) COOK FARM SUPPLY COMPANY Budgeted Income Statement $ $ Link to Text Link to Text Question Attempts: Unlimited Save for later Submit Answer

Explanation / Answer

Sales Budget Q1 Q2 6 Months Expected Sales Unit 29500 43900 73400 Selling price per unit 63 63 63 Total sales 1858500 2765700 4624200 Production Budget Q1 Q2 6 Months Budgeted Sales Unit 29500 43900 73400 add: Desired Ending Inventory 12300 18100 18100 Total Units needed 41800 62000 91500 Less: Beginning Inventory 8200 12300 8200 Production units 33600 49700 83300 Direct Material budget for GUMM Production Units 33600 49700 83300 Per Unit GUMM required 5 5 5 Total Gumm Required 168000 248500 416500 add: Desired Ending Inventory 10100 13300 13300 Total Units needed 178100 261800 429800 Less: Beginning Inventory 9300 10100 9300 Pruchases 168800 251700 420500 Per poung cost 3.8 3.8 3.8 Total Purchases 641440 956460 1597900 Direct Labor Budget Production Units 33600 49700 83300 Per Unit Hours required 0.25 0.25 0.25 Total Hours Required 8400 12425 20825 Per Hour Cost 14 14 14 Total Direct Labor 117600 173950 291550 Selling and Administrative Expense Budget Variable Selling and Admin 15% of Sale 278775 414855 693630 Fixed Selling and Adming 18000 18000 36000 Total Selling and Administrative 296775 432855 729630 Multi-Step Income Statement Sales Revenue 63*73400 4624200 Less: Cost of Goods Sold (working below) 37.94*73400 2784796 Gross Profit 1839404 Operating Expense: Selling and Adminstrative: Variable 693630 Fixed 36000 Total Operating Expense 729630 Income from Opeartions 1109774 Less: Interest Expense 100000 Income bfore taxes 1009774 Income Tax 302932 Net Income 706842 Working Quantity Cost per quantity Total Cost per Unit -Direct Material-Gum 5 3.8 19.00 -Direct Material-Tarr 6 1.75 10.50 -Direct Labor 0.25 15 3.75 -Manufacturing Overhead 125% of Labor 0.25 18.75 4.69 Per Unit Cost 37.94

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