Question

Problem 9-1A (Part Level Submission) 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, 43,700 bags. Selling price is $63 per bag 2. Direct materials: each bag of Snare requires 4 pounds of Gumm at a cost of $3.8 per pound and 6 pounds of Tarr at $1.75 per pound 3. Desired inventory levels: Type of Inventory anuary 1 April 1 July 1 Snare (bags) Gumm (pounds) Tarr (pounds) 8,200 9,500 14,100 12,100 10,100 20,300 18,500 13,200 25,200 4. Direct labor: direct labor time is 15 minutes per bag at an hourly rate of $14 per hour 5. Selling and administrative expenses are expected to be 15% of sales plus $180,000 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 $298,000 in quarter 1 and $423,500 in quarter2 Note: Do not prepare the manufacturing overhead budget or the direct materials budget for Tarr.)

Answer 1

Required Budgets are as prepared below:

Cook farm Supply Company
Production Budget
For the Six Months Ending June 30
	Quarter		Six
	1	2	Months
Expected unit sales	29,800	43,700	73,500
Add: Desired ending finished goods units	12,100	18,500	18,500
Total required units	41,900	62,200	92,000
Less: Beginning finished goods units	8,200	12,100	8,200
Required production units	33,700	50,100	83,800
Cook farm Supply Company					Cook farm Supply Company
Direct Materials Budget - Gumm					Direct Materials Budget - Tarr
For the Six Months Ending June 30					For the Six Months Ending June 30
	Quarter		Six				Quarter		Six
	1	2	Months				1	2	Months
Units to be produced	33,700	50,100	83,800		Units to be produced		33,700	50,100	83,800
Direct materials per unit (pounds)	4	4	5		Direct materials per unit (pounds)		6	6	6
Total pounds needed for production	134,800	200,400	419000		Total pounds needed for production		202,200	300,600	502800
Add: Desired ending direct materials (pounds)	10,100	13,200	13,200		Add: Desired ending direct materials (pounds)		20,300	25,200	25,200
Total materials required	144,900	213,600	432,200		Total materials required		222,500	325,800	528,000
Less: Beginning direct materials (pounds)	9,500	10,100	9,500		Less: Beginning direct materials (pounds)		14,100	20,300	14,100
Direct materials purchases	135,400	203,500	422,700		Direct materials purchases		208,400	305,500	513,900
Cost per pound	3.8	3.8	3.8		Cost per pound		1.75	1.75	1.75
Total cost of direct materials purchases	$514,520	$773,300	$1,606,260		Total cost of direct materials purchases		$364,700	$534,625	$899,325
Cook farm Supply Company
Direct Labor Budget
For the Six Months Ending June 30
	Quarter		Six
	1	2	Months
Units to be produced	33,700	50,100	83,800
Direct labor hours per unit	0.25	0.25	0.25
Total required direct labor hours	8,425	12,525	20,950
Direct labor cost per hour	14	14	14
Total direct labor cost	$117,950	$175,350	$293,300
Cook farm Supply Company
Selling and Administrative Budget
For the Six Months Ending June 30
	Quarter		Six
	1	2	Months
Sales per unit	29,800	43,700	73,500
Budgeted Sales	1,877,400	2,753,100	4,630,500
Variable (.15 x sales)	$                  281,610	$ 412,965	$ 694,575
Fixed	180,000	180,000	180,000
Total	$                  461,610	$ 592,965	$ 874,575