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 1,28,600 bags: quarter 2.42,600 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 8,200 April 1 12,100 July 1 18,500 Snare (bags) Gumm (pounds) 9,400 14,500 10,300 20,100 13.400 25,500 Tarr (pounds) 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 $176,000 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 $422,500 in quarter 2. (Note: Do not prepare the manufacturing overhead budget or the direct materials budget for Tarr.)

Answer 1

Solution 1:

Sales Budget - Cook Farm Supply Company
Particulars	Q1	Q2	6 Months
Expected unit sales	28600	42600	71200
Unit selling price	$63.00	$63.00	$63.00
Budgeted Sales Revenue	$1,801,800.00	$2,683,800.00	$4,485,600.00

Solution 2:

Production Budget - Cook Farm Supply Company
Particulars	Q1	Q2	6 Months
Expected unit sales	28600	42600	71200
Add: Desired ending finished goods units	12100	18500	18500
Total required units	40700	61100	89700
Less: Beginning finished goods units	8200	12100	8200
Budgeted production units	32500	49000	81500

Solution 3:

Direct Material Budget - Gumm - Cook Farm Supply Company
Particulars	Q1	Q2	6 Months
Budgeted production units	32500	49000	81500
Material needed per unit	5	5	5
Total material requirment to meet production	162500	245000	407500
Add: Desired units of material of Gumm in ending inventory	10300	13400	13400
Total needs	172800	258400	420900
Less: units of material in beginning inventory	9400	10300	9400
Budgeted purchase units of Gumm (In Pound)	163400	248100	411500
Cost per pound	$3.80	$3.80	$3.80
Budgeted cost of raw material purchases	$620,920.00	$942,780.00	$1,563,700.00

Solution 4:

Selling and Administartive expenses Budget - Cook Farm Supply Company
Particulars	Q1	Q2	6 Months
Sales	$1,801,800.00	$2,683,800.00	$4,485,600.00
Variable selling expenses (15% of sales)	$270,270.00	$402,570.00	$672,840.00
Fixed selling expenses	$176,000.00	$176,000.00	$352,000.00
Budgeted selling and administrative expenses	$446,270.00	$578,570.00	$1,024,840.00