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, 29,800 bags; quarter 2, 42,400 bags. Selling price is $62 per bag.
2.		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 $1.50 per pound.
3.		Desired inventory levels:

Type of Inventory		January 1		April 1		July 1
Snare (bags)		8,100		12,100		18,100
Gumm (pounds)		9,500		10,300		13,100
Tarr (pounds)		14,100		20,100		25,200

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 $179,000 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 $422,500 in quarter 2.

(a)

Partially correct answer iconYour answer is partially correct.

Prepare the sales budget.

COOK FARM SUPPLY COMPANY Sales Budget                                                                       For the Six Months Ending June 30, 2017For the Quarter Ending June 30, 2017June 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                                                                       June 30, 2017For the Quarter Ending June 30, 2017For the Six Months Ending June 30, 2017
		Quarter				Six Months
		1		2
Cost per PoundDirect Materials PurchasesExpected Unit SalesTotal Pounds Needed for ProductionTotal Direct Labor CostTotal Required UnitsDirect Materials per UnitRequired Production UnitsDesired Ending Direct MaterialsBeginning Direct MaterialsDesired Ending Finished Goods UnitsTotal Cost of Direct Materials PurchasesTotal Materials RequiredDirect Labor Time per UnitBeginning Finished Goods UnitsTotal Required Direct Labor HoursDirect Labor Cost per Hour
AddLess:                                                                       Required Production UnitsDirect Labor Cost per HourTotal Cost of Direct Materials PurchasesDesired Ending Finished Goods UnitsDirect Materials PurchasesDirect Labor Time per UnitDesired Ending Direct MaterialsDirect Materials per UnitExpected Unit SalesCost per PoundTotal Required UnitsTotal Required Direct Labor HoursBeginning Finished Goods UnitsTotal Direct Labor CostBeginning Direct MaterialsTotal Pounds Needed for ProductionTotal Materials Required
Beginning Finished Goods UnitsTotal Required Direct Labor HoursTotal Required UnitsTotal Cost of Direct Materials PurchasesRequired Production UnitsTotal Pounds Needed for ProductionDirect Labor Cost per HourTotal Direct Labor CostDirect Labor Time per UnitDirect Materials per UnitBeginning Direct MaterialsCost per PoundDesired Ending Direct MaterialsDesired Ending Finished Goods UnitsDirect Materials PurchasesExpected Unit SalesTotal Materials Required
AddLess:                                                                       Desired Ending Direct MaterialsTotal Required UnitsRequired Production UnitsCost per PoundTotal Direct Labor CostBeginning Finished Goods UnitsTotal Pounds Needed for ProductionDirect Labor Time per UnitDirect Materials PurchasesExpected Unit SalesTotal Required Direct Labor HoursBeginning Direct MaterialsTotal Materials RequiredDirect Labor Cost per HourTotal Cost of Direct Materials PurchasesDirect Materials per UnitDesired Ending Finished Goods Units
Total Required Direct Labor HoursTotal Cost of Direct Materials PurchasesDirect Materials per UnitDesired Ending Direct MaterialsRequired Production UnitsCost per PoundDirect Labor Time per UnitBeginning Finished Goods UnitsBeginning Direct MaterialsTotal Direct Labor CostDesired Ending Finished Goods UnitsDirect Labor Cost per HourTotal Materials RequiredTotal Required UnitsDirect Materials PurchasesTotal Pounds Needed for ProductionExpected Unit Sales

Answer 1

COOK FARM SUPPLY COMPANY
Sales Budget
For the Six Months Ending June 30, 2017
	Quarter
	1	2	Six Months
Expected unit sales	29800	42400	72200
Unit selling price	62	62	62
Total sales	1847600	2628800	4476400
COOK FARM SUPPLY COMPANY
Production Budget
For the Six Months Ending June 30, 2017
	Quarter
	1	2	Six Months
Expected unit sales	29800	42400
Add: Desired ending Finished goods units	12100	18100
Total required units	41900	60500
Less: Beginning Finished Goods	8100	12100
Required production units	33800	48400	82200