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 2017.

1.		Sales: quarter 1, 28,100 bags; quarter 2, 43,400 bags. Selling price is $63 per bag.
2.		Direct materials: each bag of Snare requires 4 pounds of Gumm at a cost of $3.8 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)		8,100		12,500		18,300
Gumm (pounds)		9,100		10,200		13,100
Tarr (pounds)		14,200		20,500		25,500

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 $303,000 in quarter 1 and $423,500 in quarter 2.

(a)

Prepare the sales budget.

COOK FARM SUPPLY COMPANY Sales Budget                                                                       For the Quarter Ending June 30, 2017June 30, 2017For the Six Months Ending June 30, 2017
		Quarter				Six Months
		1		2
Expected unit sales
Unit selling price		$		$		$
Total sales		$		$		$

Prepare the production budget.

COOK FARM SUPPLY COMPANY Production Budget                                                                       For the Six Months Ending June 30, 2017For the Quarter Ending June 30, 2017June 30, 2017
		Quarter				Six Months
		1		2
Cost per PoundRequired Production UnitsDirect Materials per UnitDesired Ending Finished Goods UnitsTotal Materials RequiredDirect Labor Time per UnitTotal Direct Labor CostTotal Required UnitsExpected Unit SalesDesired Ending Direct MaterialsTotal Required Direct Labor HoursDirect Materials PurchasesBeginning Finished Goods UnitsBeginning Direct MaterialsDirect Labor Cost per HourTotal Cost of Direct Materials PurchasesTotal Pounds Needed for Production
AddLess:                                                                       Total Pounds Needed for ProductionExpected Unit SalesDesired Ending Direct MaterialsDirect Materials PurchasesTotal Materials RequiredDirect Labor Cost per HourTotal Required UnitsTotal Direct Labor CostRequired Production UnitsTotal Required Direct Labor HoursDirect Labor Time per UnitDesired Ending Finished Goods UnitsBeginning Direct MaterialsTotal Cost of Direct Materials PurchasesCost per PoundDirect Materials per UnitBeginning Finished Goods Units
Total Materials RequiredDirect Materials PurchasesExpected Unit SalesTotal Required Direct Labor HoursBeginning Finished Goods UnitsDesired Ending Direct MaterialsTotal Direct Labor CostTotal Pounds Needed for ProductionDirect Labor Cost per HourBeginning Direct MaterialsDesired Ending Finished Goods UnitsTotal Cost of Direct Materials PurchasesTotal Required UnitsDirect Labor Time per UnitCost per PoundRequired Production UnitsDirect Materials per Unit
AddLess:                                                                       Total Cost of Direct Materials PurchasesTotal Direct Labor CostTotal Pounds Needed for ProductionDirect Materials PurchasesExpected Unit SalesBeginning Direct MaterialsDirect Materials per UnitTotal Required UnitsRequired Production UnitsDirect Labor Cost per HourBeginning Finished Goods UnitsDesired Ending Direct MaterialsCost per PoundTotal Materials RequiredDesired Ending Finished Goods UnitsDirect Labor Time per UnitTotal Required Direct Labor Hours
Total Cost of Direct Materials PurchasesTotal Direct Labor CostTotal Required Direct Labor HoursTotal Pounds Needed for ProductionExpected Unit SalesRequired Production UnitsDirect Labor Time per UnitBeginning Finished Goods UnitsDirect Materials PurchasesBeginning Direct MaterialsCost per PoundTotal Required UnitsTotal Materials RequiredDesired Ending Finished Goods UnitsDesired Ending Direct MaterialsDirect Labor Cost per HourDirect Materials per Unit

Answer 1

Sales Budget
For the six months ending June 30,2017
	Quarter
	1	2	Six months
Expected unit sales	28100	43400	71500
Unit selling price	63	63	63
Total sales	1770300	2734200	4504500
Production Budget
For the six months ending June 30,2017
	Quarter
	1	2	Six months
Expected unit sales	28100	43400
Add: Desired ending Finished goods units	12500	18300
Total Required units	40600	61700
Less: Beginning Finished goods units	8100	12500
Required Production units	32500	49200	81700