Question

(c) Compute the target selling price for R2-D2. (d) Compute variable cost per unit, fixed cost per unit, and total cost per unit assuming that 80,000 R2-D2s are produced sold during the year. T! : Bolivar Farm Supply Company manufactures and sells a fertilizer called Basic II. Prepare budgeted inca The following data are available for preparing budgets for Basic II for the first 2 quarters of statement and suppor 2017. budgets. (LO 1,2,3) 1. Sales: Quarter 1,40,000 bags; quarter 2.50,000 bags. Selling price is $60 per bag. 2. Direct materials: Each bag of Basic II requires 6 pounds of Crup at a cost of $4 per pound and 10 pounds of Dert at $2 per pound. 3. Desired inventory levels: Type of Inventory January 1 April July 1 asic II (bags) 10,000 15,000 20,000 Crup (pounds) 9,000 12,000 15,000 Dert (pounds) 15,000 20,000 25,000 4. Direct labor: Direct labor time is 15 minutes per bag at an hourly rate of $10 per hour. 5. Selling and administrative expenses are expected to be 10% of sales plus $150,000 per quarter. 6. Income taxes are expected to be 30% of income from operations. Your assistant has prepared two budgets: (1) The manufacturing overhead budget shows expected costs to be 100% of direct labor cost. (2) The direct materials budget for Dert which shows the cost of Dert to be $682,500 in quarter 1 and $825,00 in quarter 2. Instructions Prepare the budgeted income statement for the first 6 months of 2017 and all required supporting budgets by quarters. (Note: Use variable and fixed in the selling and adminis- trative expense budget.) Do not prepare the manufacturing overhead budget or the direct materials budget for Dert. Net income $105,000 Cost per bag 549 1 Dunes Company estimates that 240,000 direct labor hours will be worked during 2017 in the Assembly Denartment. On this basis. the following budgeted Prepare flexible bud and budget report 1

Answer 1

BF Supply Company Sales Budget For the six months ending June 30, 2017 Particulars 1st Quarter 2nd Quarter Six months Expected unit sales (A) 40,000 50,000 90,000 Unit selling price (B) $60 $60 $60 Total sales (AxB) 2.400.000 3.000.000 5.400.000 BF Supply Company Production Budget For the six months ending June 30, 2017 Particulars 1st Quarter 2nd Quarter Six months Expected unit sales 40.000 50,000 90,000 Add: Desired inventory 15,000 20.000 35.000 Total units required 55,000 70,000 125,000 Less: Beginning inventory 10.000 15.000 25.000 Required production units 45,000 55,000 100.000

BF Supply Company Direct Materials Budget - Crup For the six months ending June 30, 2017 Particulars 1st Quarter 2nd Quarter Six months Units to be produced 45,000 55,000 100,000 Multiply: Direct materials needed per unit (lbs) Direct materials required for units to be produced 225,000 275,000 500,000 Add: Desired ending direct material 12.000 15.000 27.000 Total direct materials 237,000 290,000 527,000 Less: Beginning direct materials 9,000 12.000 21.000 Required direct materials for production 228.000 278,000 506.000 Cost per pound $4 $4 Total cost of direct material purchase S 912.000 $1.112.000 $2.024.000 $4

BF Supply Company Direct Labor Budget For the six months ending June 30, 2017 Particulars 1st Quarter 2nd Quarter Six months Units to be produced 45,000 55,000 100,000 Multiple: Direct labor time per bag 0.25 hour 0.25 hour 0.25 hour Total direct labor hours required 11.250 13,750 25,000 Multiple: Direct labor rate per hour $12 $12 Total Direct Labor Cost $135,000 $165,000 $300,000 $12 BF Supply Company Selling & Admin Budget For the six months ending June 30, 2017 Particulars 1st Quarter 2nd Quarter Six months Budgeted sales in units 40.000 50,000 90,000 Variable (10% of salesxSelling price) $ 240,000 $ 300,000 $ 340,000 Fixed $150,000 $150.000 $300.000 Total $390,000 $450,000 $840.000

Sales BF Supply Company Budgeted Income Statement For the six months ending June 30, 2017 $5,400,000 Less: Cost of goods sold (90,000 $46) S4,140,000 Gross profit $1,260,000 Less: Selling and admin expenses $840.000 Income from operations $420,000 Interest expense Income before taxes $420,000 Less: Income tax (30%) $126.000 Net Income $294.000 Quantity Unit Cost Total $20 Cost Element Direct Materials: Crup (lbs) Cert (lbs) Direct labor (hour) Manufacturing Overhead (100% of Direct labor cost) Poest labor cost) $46