Question

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, 28,400 bags; quarter 2, 43,800 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 6 pounds of Tarr at $1.50 per pound.
3.		Desired inventory levels:

Type of Inventory		January 1		April 1		July 1
Snare (bags)		8,500		12,100		18,100
Gumm (pounds)		9,300		10,500		13,100
Tarr (pounds)		14,200		20,100		25,100

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 $301,000 in quarter 1 and $427,500 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 choose the accounting period June 30, 2020For the Six Months Ending June 30, 2020For the Quarter Ending June 30, 2020
		Quarter				Six Months
		1		2
Expected unit sales		enter a number of units		enter a number of units		enter a number of units
Unit selling price		$enter a dollar amount		$enter a dollar amount		$enter a dollar amount
Total sales		$enter a total dollar amount		$enter a total dollar amount		$enter a total dollar amount

Prepare the production budget.

COOK FARM SUPPLY COMPANY Production Budget choose the accounting periodJune 30, 2020For the Quarter Ending June 30, 2020For the Six Months Ending June 30, 2020 For the Six Months Ending June 30, 2020June 30, 2020For the Quarter Ending June 30, 2020
		Quarter				Six Months
		1		2
select an opening production budget itemRequired Production UnitsDesired Ending Finished Goods UnitsDirect Materials per UnitBeginning Direct MaterialsTotal Pounds Needed for ProductionTotal Cost of Direct Materials PurchasesDesired Ending Direct MaterialsTotal Required UnitsTotal Materials RequiredExpected Unit SalesDirect Materials PurchasesCost per PoundDirect Labor Time per UnitTotal Direct Labor CostTotal Required Direct Labor HoursBeginning Finished Goods UnitsDirect Labor Cost per Hour Beginning Direct MaterialsBeginning Finished Goods UnitsCost per PoundDesired Ending Direct MaterialsDesired Ending Finished Goods UnitsDirect Labor Cost per HourDirect Labor Time per UnitDirect Materials per UnitDirect Materials PurchasesExpected Unit SalesRequired Production UnitsTotal Cost of Direct Materials PurchasesTotal Direct Labor CostTotal Materials RequiredTotal Pounds Needed for ProductionTotal Required Direct Labor HoursTotal Required Units		enter a number of units		enter a number of units
		enter a number of units		enter a number of units
		enter a total number of units for the first part		enter a total number of units for the first part
		enter a number of units		enter a number of units
		enter a total number of units		enter a total number of units		enter a total number of units

Prepare the direct materials budget

COOK FARM SUPPLY COMPANY Direct Materials Budget—Gumm choose the accounting periodFor the Six Months Ending June 30, 2020For the Quarter Ending June 30, 2020June 30, 2020 For the Six Months Ending June 30, 2020June 30, 2020For the Quarter Ending June 30, 2020
		Quarter				Six Months
		enter a number of units		enter a number of units
select an itemDirect Materials PurchasesExpected Unit SalesTotal Required UnitsDirect Materials per UnitTotal Materials RequiredBeginning Finished Goods UnitsTotal Pounds Needed for ProductionDesired Ending Direct Materials (Pounds)Total Required Direct Labor HoursBeginning Direct Materials (Pounds)Total Cost of Direct Materials PurchasesDesired Ending Finished Goods UnitsDirect Labor Time (Hours) per UnitTotal Direct Labor CostCost per PoundDirect Labor Cost per HourUnits to be Produced Beginning Direct Materials (Pounds)Beginning Finished Goods UnitsCost per PoundDesired Ending Direct Materials (Pounds)Desired Ending Finished Goods UnitsDirect Labor Cost per HourDirect Labor Time (Hours) per UnitDirect Materials per UnitDirect Materials PurchasesExpected Unit SalesTotal Cost of Direct Materials PurchasesTotal Direct Labor CostTotal Materials RequiredTotal Pounds Needed for ProductionTotal Required Direct Labor HoursTotal Required UnitsUnits to be Produced		enter the amount of pounds		enter the amount of pounds
		enter a total amount of pounds for the first part		enter a total amount of pounds for the first part
		enter the amount of pounds		enter the amount of pounds
		enter a total amount of pounds for the second part		enter a total amount of pounds for the second part
		enter the amount of pounds		enter the amount of pounds
		enter a total amount of pounds for the third part		enter a total amount of pounds for the third part
		$enter a total dollar amount		$enter a total dollar amount		$enter a total dollar amount

Prepare the direct labor budget

Prepare the selling and administrative expense budget.

Prepare the budgeted multiple-step income statement for the first 6 months

Answer 1

Solution:

Sales Budget - Cook Farm Supply Company
Particulars	Q1	Q2	6 Months
Expected unit sales	28400	43800	72200
Unit selling price	$61.00	$61.00	$61.00
Budgeted Sales Revenue	$1,732,400.00	$2,671,800.00	$4,404,200.00

Production Budget - Cook Farm Supply Company
Particulars	Q1	Q2	6 Months
Expected unit sales	28400	43800	72200
Add: Desired ending finished goods units	12100	18100	18100
Total required units	40500	61900	90300
Less: Beginning finished goods units	8500	12100	8500
Budgeted production units	32000	49800	81800

Direct Material Budget - Gumm - Cook Farm Supply Company
Particulars	Q1	Q2	6 Months
Budgeted production units	32000	49800	81800
Material needed per unit	4	4	4
Total material requirment to meet production	128000	199200	327200
Add: Desired units of material of Gumm in ending inventory	10500	13100	13100
Total needs	138500	212300	340300
Less: units of material in beginning inventory	9300	10500	9300
Budgeter purchase units of Gumm (In Pound)	129200	201800	331000
Cost per pound	$3.80	$3.80	$3.80
Budgeted cost of raw material purchases	$490,960.00	$766,840.00	$1,257,800.00

Direct Labor Budget - Cook Farm Supply Company
Particulars	Q1	Q2	6 Months
Unit to Produce	32000	49800	81800
Direct labor required per unit (in hrs)	0.25	0.25	0.25
Required direct labor hours	8000	12450	20450
Labor rate	$16.00	$16.00	$16.00
Budgeted direct labor cost	$128,000.00	$199,200.00	$327,200.00

Selling and Administartive expenses Budget - Cook Farm Supply Company
Particulars	Q1	Q2	6 Months
Sales	$1,732,400.00	$2,671,800.00	$4,404,200.00
Variable selling expenses (15% of sales)	$259,860.00	$400,770.00	$660,630.00
Fixed selling expenses	$177,000.00	$177,000.00	$354,000.00
Budgeted selling and administrative expenses	$436,860.00	$577,770.00	$1,014,630.00