Question

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 For the Six Months Ending June 30, 2017 Sales 4477400 Cost of Goods Sold 2825900 Gross Profit 1651500 Selling and Administrative Expenses 1031610 Income from Operations 619890 185967 Income Before Income Tax 433923 Income Tax Expense 185967 Net Income /(Loss) 433923

Answer 1

COOK FARM SUPPLY COMPANY
Sales Budget
For The Six Month Ending June 30, 2017
	Quarter 1		Six Months
	1	2
Expected unit sales    (a)	29,400	44,000	73,400
Unit selling price      (b)	$61	$61	$61
Total sales                 (a) x (b)	$1,793,400	$2,684,000	$4,477,400

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COOK FARM SUPPLY COMPANY
Production Budget
For The Six Month Ending June 30, 2017
	Quarter 1		Six Months
	1	2
Expected unit sales	29,400	44,000
Add: Desired Ending Finished Goods Units	12,300	18,500
Total Required Units	41,700	62,500
Less: Beginning Finished Goods Units	8,500	12,300
Required Production Units	33,200	50,200	83,400

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COOK FARM SUPPLY COMPANY
Direct Material Budget - Gumm
For The Six Month Ending June 30, 2017
	Quarter 1		Six Months
	1	2
Units to be produced     [Refer production budget]      (a)	33,200	50,200
Direct Materials per Unit         (In pounds)                 (b)	5	5
Total Pounds Needed for Production                       (a x b)	166,000	251,000
Add: Desired Ending Direct Materials (pounds)	10,200	13,100
Total Materials Required	176,200	264,100
Less: Beginning Direct Materials (pounds)	9,400	10,200
Direct Materials Purchases                                     (c)	166,800	253,900
Cost per Pound                                                        (d)	$3.80	$3.80
Total Cost of Direct Materials Purchases        (c x d)	$633,840	$964,820	$1,598,660

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COOK FARM SUPPLY COMPANY
Direct Labor Budget
For The Six Month Ending June 30, 2017
	Quarter 1		Six Months
	1	2
Units to be produced     [Refer production budget]                                     (a)	33,200	50,200
Direct Labor Time (hours) per Unit           (15 x 1 hour) / 60 minutes)      (b)	0.25	0.25
Total Required Direct Labor Hours                                                            (c = a x b)	8,300	12,550
Direct Labor Cost per Hour                                                                         (d)	16	16
Total Direct Labor Cost                                                                           (c x d)	132,800	200,800	333,600

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COOK FARM SUPPLY COMPANY
Selling and Administrative Expense Budget
For The Six Month Ending June 30, 2017
	Quarter 1		Six Months
	1	2
Budgeted Sales in Units	29,400	44,000	73,400
Variable Cost   [15% of sales]    (a)	$269,010	$402,600	$671,610
Fixed Cost                                    (b)	$180,000	$180,000	$360,000
Total                                             (a + b)	$449,010	$582,600	$1,031,610

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COOK FARM SUPPLY COMPANY
Budgeted Income Statement
For The Six Month Ending June 30, 2017
Sales                                       [Refer sales budget]	$4,477,400
Cost of Goods Sold                [Refer working note 1 below]	$2,825,900
Gross Profit                           [Sales - Cost of goods sold]	$1,651,500
Selling and Administrative Expenses	$1,031,610
Income from operatations      [Gross profit - Selling and Administrative Expenses]	$619,890
Interest expense	$100,000
Income before Income Taxes    [Income from operations - Interest expense]	$519,890
Income Tax Expense                 [Income before income taxes x 30%]	$155,967
Net Income / (Loss)	$363,923

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Working note 1 - Computation of Cost of Goods Sold
	Quarter 1	Quarter 2	6 months
Number of snare bags sold                                        (a)	29,400	44,000
Total cost per unit [Refer working note 2]                  (b)	38.50	38.50
Cost of Goods Sold                                                       (a x b)	$1,131,900	$1,694,000	$2,825,900

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Working note 2 - Computation of Cost per unit
Direct materials:
Gumm                                 (5 pounds x $3.80)	19.00
Tarr                                     (6 pounds x $1.75)	10.50	29.50
Direct labor                                (0.25 hours x $16)		4.00
Manufactured overhead budget   [Direct labor cost x 125% = $4 x 125%]		5.00
Cost per unit		38.50