Question

Question 3 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, 28,000 bags; quarter 2, 43,000 bags. Selling price is $61 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 Snare (bags) Gumm (pounds) Tarr (pounds) January 1 8,100 9,200 14,400 April 1 12,400 10,400 20,300 July 1 18,400 13,500 25,300 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 $302,000 in quarter 1 and $427,500 in quarter 2. (Note: Do not prepare the manufacturing overhead budget or the direct materials budget for Tarr.) Your answer is partially correct. Try again. Prepare the sales budget. COOK FARM SUPPLY COMPANY Sales Budget For the Quarter Ending June 30, 2020

Answer 1

The desired budgets and Income statement is hereunder:

COOK FARM SUPPLY COMPANY
Direct Materials Budget - tarr
For the Six months ending June 30, 2020
	Q1	Q2	Six Months
Units to be Produced	32300	49000
DM per unit	6	6
Total pounds needed for production	193800	294000	487800
add: desired ending direct material,pounds	20300	25300
Total materials required	214100	319300
less: Beginning direct materials, pounds	14400	20300
Direct Mat. Purchases	199700	299000
Cost per pound	1.75	1.75
Total cost of Direct Materials purchased	349475	523250	872725
COOK FARM SUPPLY COMPANY
Direct Labor Budget
For the Six months ending June 30, 2020
	Q1	Q2	Six Months
Units to be produced	32300	49000
Direct lab. Time per unit, hours	0.25	0.25
Total required Direct labor hours	8075	12250	20325
Direct lab. Cost per hour	16	16	16
Total Direct Labor Cost	129200	196000	325200
COOK FARM SUPPLY COMPANY
Selling and Administrative Expense Budget
For the Six months ending June 30, 2020
	Q1	Q2	Six Months
Sales	1708000	2623000	4331000
Variable exp. 15% of sales	256200	393450	649650
Fixed expenses	177000	177000	354000
Total Selling and Administration Expenses	433200	570450	1003650
COOK FARM SUPPLY COMPANY
Budgeted Income Statement
For the Six months ending June 30, 2020
	Amount $
Sales	4331000
Less: Direct Material expenses	2398350		406500*3.8 + 487800*1.75
Less:Direct labor expenses	325200
Gross Profit	1607450
Less: Selling and Admin exp	1003650
Income before Interest	603800
Less:interest	100000
Income before taxes	503800
Less:Income taxes	151140
Net Income	352660