Farm Supply Company manufactures and sells a pesticide called Snare. The followi

Question

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. Salesi quarter 1. 28.300 bagsi quarter 2, 43.800 bags. Selling price is $61 per bag 2. Direct materialsi each bag of Snare requires 4 pounds of Gumm at a cost of $3.8 per pound and 6 pounds of Tar at $1.50 per pound Desired inventory levels -April1 July 1 ngre (bagn) Gumm (pounds) Tarr (pounds) 12.100 9,30010,500 14,20020.100 18.100 13.100 25.100 8,500 4. Direct labor direct labor time is 15 minutes per bag at an hourly rate of $16 per hour 5. Sehng and administrative expenses are expected to be i5% of sale, plua S177.000 per quarter, 6. Interest expense is $100,000. 7. tncome tares are expected to be 30% of income before incom" taxes. Your assistant has prepared tvo budgets: (1) the manufacturing overhead budget shows expected costs to be 125% of direct labor cost, and (2) the direct materials budget for Tarr shovs the cost of Tarr purchases to be $301.000n quarter 1 and $427.500 in quarter 2. (Note: De not prepare the manufacturing overhead budget or the direct materials budget for Tare) Prepare the sales budget

Explanation / Answer

COOK FARM SUPPLY COMPANY Sales Budget Quarter1 Quarter2 Six Months A Expected unit sales                  28,300                  43,800               72,100 B Unit selling price $61 $61 C=A*B Total Sales $        1,726,300 $        2,671,800 $     4,398,100 COOK FARM SUPPLY COMPANY Production Budget Quarter1 Quarter2 Six Months A Expected unit sales                  28,300                  43,800               72,100 B Ending Inventory                  12,100                  18,100 C=A+B Total units required                  40,400                  61,900 D Beginning Inventory                     8,500                  12,100 E=C-D Budgeted production in units                  31,900                  49,800               81,700 COOK FARM SUPPLY COMPANY Direct Materials Budget-Gumm Quarter1 Quarter2 Six Months A Production quantity                  31,900                  49,800               81,700 B=A*4 Quantity of gumm required(Pounds)                127,600                199,200             326,800 C Ending inventory                  10,500                  13,100 D Beginning inventory                     9,300                  10,500 E=B+C-D Budgeted purchase quantity                128,800                201,800             330,600 F Budgeted purchase price $3.80 $3.80 G=E*F Budgeted purchase dollars $            489,440 $            766,840 $     1,256,280 COOK FARM SUPPLY COMPANY Direct Labor Budget Quarter1 Quarter2 Six Months A Production quantity                  31,900                  49,800               81,700 B=A*0.25 Direct labor hours                     7,975                  12,450               20,425 C Direct labor rate $16 $16 D=B*C Direct labor cost $            127,600 $            199,200 $        326,800 COOK FARM SUPPLY COMPANY Selling and Administrative expense budget Quarter1 Quarter2 Six Months A Budgeted sales $        1,726,300 $        2,671,800 $     4,398,100 B=(0.15*A)+177000 Selling and administrative expense $            435,945 $            577,770 $     1,013,715 COOK FARM SUPPLY COMPANY Budgeted Income Statement For the period january 1 to June30 A Sales $     4,398,100 Cost of goods sold: Direct materialscosts: B Gumm(4*3.8*72100) $ 1,095,920.00 C Tarr(6*1.5*72100) $      648,900.00 D=B+C Total direct materials cost $        1,744,820 E Direct labor cost $            326,800 F=1.25*E Manufacturing overhead $            408,500 G=D+E+F Cost of goods sold: $     2,480,120 H=A-G Gross Profit $     1,917,980 I Selling and Administrative expenses $     1,013,715 J=H-I Earning before interest and taxes(EBIT) $        904,265 K Interest expenses $100,000 L=(J-k) Earning before taxes(EBT) $        804,265 M=0.3*L Taxes $        241,280 N=(L-M) Net Income after taxes $        562,986

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