P21-1A Prepare budgeted income statement and supporting budgets. Cook Farm Suppl
ID: 2562397 • Letter: P
Question
P21-1A Prepare budgeted income statement and supporting budgets. 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, 40,000 bags; quarter 2, 56,000 bags. Selling price is $60 per bag. 2. Direct materials: each bag of Snare requires 4 pounds of Gumm at a cost of $3.80 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) 8,000 15,000 18,000 Gumm (pounds) 9,000 10,000 13,000 Tarr (pounds) 14,000 20,000 25,000 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 $175,000 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 $297,000 in quarter 1 and $439,500 in quarter 2. Instructions Prepare the budgeted multi-step income statement for the first 6 months and all required operating budgets by quarters. (Note: Use variable and fixed in the selling and administrative expense budget.) Do not prepare the manufacturing overhead budget or the direct materials budget for Tarr. NOTE: Enter a number in cells requesting a value; enter either a number or a formula in cells with a "?" . COOK FARM SUPPLY COMPANY Sales Budget For the Six Months Ending June 30, 2017 Quarter Six 1 2 Months Expected unit sales Value Value ? Unit selling price $60 $60 $60 Total sales ? ? ? COOK FARM SUPPLY COMPANY Production Budget For the Six Months Ending June 30, 2017 Quarter Six 1 2 Months Expected unit sales Value Value Add: Desired ending finished goods units Value Value Total required units ? ? Less: Beginning finished goods units Value Value Required production units ? ? ? COOK FARM SUPPLY COMPANY Direct Materials Budget - Gumm For the Six Months Ending June 30, 2017 Quarter Six 1 2 Months Units to be produced Value Value Direct materials per unit (lbs.) X 4lbs X 4lbs Total pounds needed for production ? ? Add: Desired ending direct materials (lbs.) Value Value Total materials required ? ? Less: Beginning direct materials (lbs.) Value Value Direct materials purchases ? ? Cost per pound X $3.80 X $3.80 Total cost of direct materials purchases ? ? ? COOK FARM SUPPLY COMPANY Direct Labor Budget For the Six Months Ending June 30, 2017 Quarter Six 1 2 Months Units to be produced Value Value Direct labor hours per unit X 1/4 X 1/4 Total required direct labor hours ? ? Direct labor cost per hour X $16 X $16 Total direct labor cost ? ? ? COOK FARM SUPPLY COMPANY Selling and Administrative Budget For the Six Months Ending June 30, 2017 Quarter Six 1 2 Months Budgeted sales in units Value Value ? Variable (.15 x sales) Value Value ? Fixed Value Value ? Total ? ? ? COOK FARM SUPPLY COMPANY Budgeted Income Statement For the Six Months Ending June 30, 2017 Sales revenue ? Cost of goods sold ? Gross Profit ? Selling and administrative expenses Value Income from operations ? Interest expense Value Income before income tax ? Income tax expense (30%) ? Net income ? Cost per Bag Cost Element Quantity Unit Cost Total Direct Materials Gumm 4 pounds Value ? Tarr 6 pounds Value ? Direct Labor 1/4 hour Value ? Manufacturing overhead ? (125% of direct labor cost) Total ? P21-1A Prepare budgeted income statement and supporting budgets. 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, 40,000 bags; quarter 2, 56,000 bags. Selling price is $60 per bag. 2. Direct materials: each bag of Snare requires 4 pounds of Gumm at a cost of $3.80 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) 8,000 15,000 18,000 Gumm (pounds) 9,000 10,000 13,000 Tarr (pounds) 14,000 20,000 25,000 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 $175,000 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 $297,000 in quarter 1 and $439,500 in quarter 2. Instructions Prepare the budgeted multi-step income statement for the first 6 months and all required operating budgets by quarters. (Note: Use variable and fixed in the selling and administrative expense budget.) Do not prepare the manufacturing overhead budget or the direct materials budget for Tarr. NOTE: Enter a number in cells requesting a value; enter either a number or a formula in cells with a "?" . COOK FARM SUPPLY COMPANY Sales Budget For the Six Months Ending June 30, 2017 Quarter Six 1 2 Months Expected unit sales Value Value ? Unit selling price $60 $60 $60 Total sales ? ? ? COOK FARM SUPPLY COMPANY Production Budget For the Six Months Ending June 30, 2017 Quarter Six 1 2 Months Expected unit sales Value Value Add: Desired ending finished goods units Value Value Total required units ? ? Less: Beginning finished goods units Value Value Required production units ? ? ? COOK FARM SUPPLY COMPANY Direct Materials Budget - Gumm For the Six Months Ending June 30, 2017 Quarter Six 1 2 Months Units to be produced Value Value Direct materials per unit (lbs.) X 4lbs X 4lbs Total pounds needed for production ? ? Add: Desired ending direct materials (lbs.) Value Value Total materials required ? ? Less: Beginning direct materials (lbs.) Value Value Direct materials purchases ? ? Cost per pound X $3.80 X $3.80 Total cost of direct materials purchases ? ? ? COOK FARM SUPPLY COMPANY Direct Labor Budget For the Six Months Ending June 30, 2017 Quarter Six 1 2 Months Units to be produced Value Value Direct labor hours per unit X 1/4 X 1/4 Total required direct labor hours ? ? Direct labor cost per hour X $16 X $16 Total direct labor cost ? ? ? COOK FARM SUPPLY COMPANY Selling and Administrative Budget For the Six Months Ending June 30, 2017 Quarter Six 1 2 Months Budgeted sales in units Value Value ? Variable (.15 x sales) Value Value ? Fixed Value Value ? Total ? ? ? COOK FARM SUPPLY COMPANY Budgeted Income Statement For the Six Months Ending June 30, 2017 Sales revenue ? Cost of goods sold ? Gross Profit ? Selling and administrative expenses Value Income from operations ? Interest expense Value Income before income tax ? Income tax expense (30%) ? Net income ? Cost per Bag Cost Element Quantity Unit Cost Total Direct Materials Gumm 4 pounds Value ? Tarr 6 pounds Value ? Direct Labor 1/4 hour Value ? Manufacturing overhead ? (125% of direct labor cost) Total ?Explanation / Answer
Sales budget
Production budget
Direct materials budget
Direct labor budget
Selling and Administrative Budget
Budgeted Income Statement
Cost per bag
Quarter Sixmonths 1 2 Expected unit sales 40000 56000 96000 Unit selling price $60 $60 $60 Total sales $2400000 $3360000 $5760000
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