In: Accounting
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, 28,200 bags; quarter 2, 43,600 bags. Selling price is $63 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 $1.75 per pound. | |
3. | Desired inventory levels: |
Type of Inventory |
January 1 |
April 1 |
July 1 |
|||
Snare (bags) | 8,100 | 12,100 | 18,100 | |||
Gumm (pounds) | 9,100 | 10,500 | 13,500 | |||
Tarr (pounds) | 14,100 | 20,100 | 25,500 |
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 $177,000 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 $303,000 in quarter 1 and $426,500 in
quarter 2.
(Note: Do not prepare the manufacturing overhead budget or
the direct materials budget for Tarr.)
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.)