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.

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 $423,500 in quarter 2.
Current Attempt in ProgresS 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. Sales: quarter 1, 29,500 bags; quarter 2, 43,900 bags. Selling price is $63 per bag. 1. Direct materials: each bag of Snare requires 5 pounds of Gumm at a cost of $3.8 per pound and 6 pounds of Tarr at $1.75 per pound. 2. Desired inventory levels: 3. January 1 Type of Inventory April 1 July 1 Snare (bags) 8,200 12,300 18,100 Gumm (pounds) 9,300 10,100 13,300 Tarr (pounds 14,300 20,300 25,200 Direct labor: direct labor time is 15 minutes per bag at an hourly rate of $14 per hour. 4. Selling and administrative expenses are expected to be 15% of sales plus $180,000 per quarter. 5. Interest expense is $100,000. 6. 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 $423,500 in quarter 2

Answer 1

Solution :

Sales Budget - Cook Farm Supply Company
Particulars	Q1	Q2	6 Months
Expected unit sales	29500	43900	73400
Unit selling price	$63.00	$63.00	$63.00
Budgeted Sales Revenue	$1,858,500.00	$2,765,700.00	$4,624,200.00

Production Budget - Cook Farm Supply Company
Particulars	Q1	Q2	6 Months
Expected unit sales	29500	43900	73400
Add: Desired ending finished goods units	12300	18100	18100
Total required units	41800	62000	91500
Less: Beginning finished goods units	8200	12300	8200
Budgeted production units	33600	49700	83300

Direct Material Budget - Gumm - Cook Farm Supply Company
Particulars	Q1	Q2	6 Months
Budgeted production units	33600	49700	83300
Material needed per unit	5	5	5
Total material requirement to meet production	168000	248500	416500
Add: Desired units of material of Gumm in ending inventory	10100	13300	13300
Total needs	178100	261800	429800
Less: units of material in beginning inventory	9300	10100	9300
Budgeted purchase units of Gumm (In Pound)	168800	251700	420500
Cost per pound	$3.80	$3.80	$3.80
Budgeted cost of raw material purchases	$641,440.00	$956,460.00	$1,597,900.00

Direct Labor Budget - Cook Farm Supply Company
Particulars	Q1	Q2	6 Months
Unit to Produce	33600	49700	83300
Direct labor required per unit (in hrs)	0.25	0.25	0.25
Required direct labor hours	8400	12425	20825
Labor rate	$14.00	$14.00	$14.00
Budgeted direct labor cost	$117,600.00	$173,950.00	$291,550.00

Selling and Administrative expenses Budget - Cook Farm Supply Company
Particulars	Q1	Q2	6 Months
Variable selling expenses (15% of sales)	$278,775.00	$414,855.00	$693,630.00
Fixed selling expenses	$180,000.00	$180,000.00	$360,000.00
Budgeted selling and administrative expenses	$458,775.00	$594,855.00	$1,053,630.00