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 2020. 1. Sales: quarter 1, 28,600 bags: quarter 2,42,600 bags. Selling price is $63 per bag. 2. Direct materials: cach bag of Snare requires 5 pounds of Gumm at a cost of $3.80 per pound and 6 pounds of Tarrat $1.75 per pound. 3. Desired inventory levels: Type of Inventory Snare (bags) Gumm (pounds) Tarr (pounds) January 1 2,200 9,400 14,500 April 1 July 1 12,100 18,500 10,300 13.400 20,100 25,500 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 $176,000 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 $300,000 in quarter 1 and $422.500 in quarter 2. (Note: Do not prepare the manufacturing overhead budget or the direct materials budget for Tarr.)

Answer 1

Sales Budget
For the six months ending June 30,2020
	Quarter
	1	2	Six months
Expected unit sales	28600	42600	71200
Unit selling price	63	63	63
Total sales	1801800	2683800	4485600
Production Budget
For the six months ending June 30,2020
	Quarter
	1	2	Six months
Expected unit sales	28600	42600
Add: Desired ending Finished goods units	12100	18500
Total Required units	40700	61100
Less: Beginning Finished goods units	8200	12100
Required Production units	32500	49000	81500