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

Answer 1

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