Question

RACK Practice Problem 1 Cook Farm Supply Company manufactures and sells a pesticide called Snare. The following data are available for preparing budgets for Snare for the first quarters of 2020 1. Sales: quarter 1, 29,200 bags: quarter 2, 43,200 bags. Selling price is $61 per bag 2. Direct materials: each bag of Snare requires pounds of Gurm at a cost of $3,80 per pound and 6 pounds of Tur at $1.50 per pound. 3. Desired inventory levels Type of Inventory January 1 April 1 Snare (bag) 8,400 12,200 18,200 Gumm (pounds) 9,200 10,200 13,500 Tare (pounds) 14,300 20,400 25,400 4. Dect labor direct labor time is ts minutes per bag at an hourly rate of $16 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 but shows expected costs to be 125% of direct labor cost, and (2) the direct mana budget for a shows the cost of a purchases to be $301,000 in quarter 1 and 425,500 in quarter 2. (Note: Do not prepare the manufacturing overhoed budget or the direct materials budget for Vor)

Answer 1

Sales Budget - COOK FARM SUPPLY COMPANY
Particulars	Q1	Q2	6 Months
Expected unit sales	29200	43200	72400
Unit Selling Price	$ 61	$ 61	$ 61
Budgeted Sales Revenue	$ 1781200	$ 2635200	$ 4416400

Production Budget - COOK FARM SUPPLY COMPANY
Particulars	Q1	Q2	6 Months
Expected unit sales	29200	43200	72400
Add: Desired ending finished goods unit	12200	18200	30400
Total required Units	41400	61400	102800
Less: Begining finished goods units	8400	12200	20600
Budgeted production units	33000	49200	82200

Direct Material Budget - COOK FARM SUPPLY COMPANY
Particulars	Q1	Q2	6 Months
Budgeted Production Units	33000	49200	82200
Gumm Material needed per Unit	5	5	5
Total material requirement to meet production	165000	246000	411000
Add: Desired unit of materail Gumm in ending inventory	10200	13500	23700
Total Needs	175200	259500	434700
Less: Units of material in Bedinning Inventory	9200	10200	19400
Budgeted purchase of Gumm	166000	249300	415300
Cost per pound	$ 3.80	$ 3.80	$ 3.80
Budgeted Cost of Gumm purchase	$ 630800	$ 947340	$ 1578140

Direct Labour Budget - COOK FARM SUPPLY COMPANY
Particulars	Q1	Q2	6 Months
Units to Produce	33000	49200	82200
Direct Labour required per Unit (in hrs)	0.25	0.25	0.25
Required Direct Labour	8250	12300	20550
Labour Rate	$ 16	$ 16	$ 16
Budgeted direct labour Cost	$ 132000	$ 196800	$ 328800

Selling & Administrative expenses Budget - COOK FARM SUPPLY COMPANY
Particulars	Q1	Q2	6 Months
Variable selling expenses ( 15% of Sales)	$ 267180	$ 395280	$ 662460
Fixed Selling Expenses	$ 180000	$ 180000	$ 360000
Budgeted Selling & Administrative expenses	$ 447180	$ 575280	$ 1022460

COOK FARM SUPPLY COMPANY
Budgeted Income Statement for six Months
Particulars	6 Months ($)
Sales Revenue ( Refer Sales Budget )	4416400
Less : Cost of Goods Sold ( Note 1)	(3044440)
Gross Profil	1371960
Selling & Administrative Expenses	(1022460)
Income from operations	349500
Less: Interest Expenses	(100000)
Income before Taxes	249500
Less: Income Taxes ( 30%)	(74850)
Net Income	174650

Note 1) Computation of Cost of goods sold

Particulars	Q1	Q2	6 Months
Direct Materail
Gumm	630800	947340	1578140
Tarr (Given )	301000	425500	726500
Direct Labour Cost	132000	196800	328800
Manufacturing Overhead ( 125% of direct Labour Cost	165000	246000	411000
Cost Of Goods Sold	1228800	1815640	3044440