Question

Pina 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, 29,200 bags; quarter 2, 43,200 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 $1.50 per pound. 3. Desired inventory levels: Type of Inventory January 1 April 1 July 1 Snare (bags) 8,400 12,200 18,200 Gumm (pounds) 9,200 10,200 13,500 Tarr (pounds) 14,300 20,400 25,400 4. Direct labor: direct labor time is 15 minutes per bag at an hourly rate of $14 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 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 $301,000 in quarter 1 and $425,500 in quarter 2.

(a) Prepare the sales budget. PINA COMPANY Sales Budget For the Six Months Ending June 30, 2017June 30, 2017For the Quarter Ending June 30, 2017 Quarter Six Months 1 2 Expected unit sales Unit selling price $ $ $ Total sales $ $ $ Prepare the production budget. PINA COMPANY Production Budget For the Quarter Ending June 30, 2017June 30, 2017For the Six Months Ending June 30, 2017 Quarter Six Months 1 2 Direct Materials PurchasesExpected Unit SalesDirect Labor Cost per HourRequired Production UnitsTotal Required Direct Labor HoursCost per PoundBeginning Finished Goods UnitsDesired Ending Direct MaterialsDirect Labor Time per UnitDesired Ending Finished Goods UnitsDirect Materials per UnitTotal Pounds Needed for ProductionTotal Cost of Direct Materials PurchasesTotal Required UnitsTotal Direct Labor CostTotal Materials RequiredBeginning Direct Materials AddLess : Direct Labor Time per UnitRequired Production UnitsTotal Cost of Direct Materials PurchasesExpected Unit SalesBeginning Finished Goods UnitsDirect Materials PurchasesTotal Materials RequiredDirect Materials per UnitTotal Required UnitsTotal Required Direct Labor HoursDirect Labor Cost per HourTotal Direct Labor CostTotal Pounds Needed for ProductionBeginning Direct MaterialsCost per PoundDesired Ending Direct MaterialsDesired Ending Finished Goods Units Total Materials RequiredTotal Pounds Needed for ProductionBeginning Finished Goods UnitsExpected Unit SalesTotal Required UnitsTotal Required Direct Labor HoursCost per PoundBeginning Direct MaterialsDirect Materials PurchasesTotal Cost of Direct Materials PurchasesDesired Ending Direct MaterialsTotal Direct Labor CostRequired Production UnitsDesired Ending Finished Goods UnitsDirect Labor Cost per HourDirect Labor Time per UnitDirect Materials per Unit AddLess : Desired Ending Finished Goods UnitsTotal Required UnitsDesired Ending Direct MaterialsTotal Pounds Needed for ProductionDirect Materials PurchasesDirect Labor Cost per HourTotal Direct Labor CostDirect Labor Time per UnitExpected Unit SalesCost per PoundTotal Required Direct Labor HoursBeginning Direct MaterialsBeginning Finished Goods UnitsDirect Materials per UnitRequired Production UnitsTotal Cost of Direct Materials PurchasesTotal Materials Required Beginning Direct MaterialsCost per PoundRequired Production UnitsDirect Materials per UnitTotal Cost of Direct Materials PurchasesDesired Ending Direct MaterialsBeginning Finished Goods UnitsDirect Labor Cost per HourTotal Direct Labor CostTotal Materials RequiredTotal Pounds Needed for ProductionTotal Required UnitsDirect Materials PurchasesTotal Required Direct Labor HoursExpected Unit SalesDesired Ending Finished Goods UnitsDirect Labor Time per Unit

Answer 1

a
PINA COMPANY
Sales Budget
For the Six Months Ending June 30, 2017
	Quarter
	1	2	Six months
Expected unit sales	29200	43200	72400
Unit selling price	61	61	61
Total sales	1781200	2635200	4416400
b
PINA COMPANY
Production Budget
For the Six Months Ending June 30, 2017
	Quarter
	1	2	Six months
Expected Unit Sales	29200	43200
Add: Desired Ending Finished Goods Units	12200	18200
Total Required Units	41400	61400
Less: Beginning Finished Goods Units	8400	12200
Required Production Units	33000	49200	82200