Question

Problem 24-01A a-c (Part Level Submission) (Video)

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 2020.

1.		Sales: quarter 1, 29,200 bags; quarter 2, 43,200 bags. Selling price is $61 per bag.
2.		Direct materials: each bag of Snare requires 5 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)		8,400		12,200		18,200
Gumm (pounds)		9,200		10,200		13,500
Tarr (pounds)		14,300		20,400		25,400

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 $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 $301,000 in quarter 1 and $425,500 in quarter 2.

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 June 30, 2020For the Six Months Ending June 30, 2020For the Quarter Ending June 30, 2020
		Quarter				Six Months
		1		2
Add/Less :
Add/Less :
		$		$
		$		$		$

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 For the Six Months Ending June 30, 2020For the Quarter Ending June 30, 2020June 30, 2020
		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
		$		$		$
		$		$		$
		$		$		$

Answer 1

Production Budget
	1st Quarter	2nd Quarter	Six Months
Sales units	29200	43200	72400
Add : Closing Stock Required	12200	18200	18200
Total Goods Required	41400	61400	90600
Less : Opening Stock	8400	12200	8400
Production Required	33000	49200	82200

Direct Material Budget-Gumm
	1st Quarter	2nd Quarter	Six Months
Production Required	33000	49200	82200
Raw Material Per unit	5	5
Raw Material for Production	165000	246000	411000
Add : Closing Stock Required	10200	13500	13500
Total Material Required	175200	259500	424500
Less : Opening Stock	9200	10200	9200
Material to be purchased	166000	249300	415300
Rate per pound	$              3.80	$               3.80
Purchase Cost	$      6,30,800	$       9,47,340	$ 15,78,140

Direct Labor Budget
	1st Quarter	2nd Quarter	Six Months
Production Required	33000	49200	82200
Labor hours per unit	0.25	0.25
Total Direct Labor hours required	8250	12300	20550
Direct labor cost per hour	$            16.00	$             16.00
Total Direct Labor cost	$      1,32,000	$       1,96,800	$   3,28,800

Selling and administrative expenses budget
	1st Quarter	2nd Quarter	Six Months
Budgeted Sales	$    17,81,200	$     26,35,200	$ 44,16,400
Variable	$       2,67,180	$       3,95,280	$   6,62,460
Fixed	$       1,80,000	$       1,80,000	$   3,60,000
Total Expenses	$      4,47,180	$       5,75,280	$ 10,22,460