#386 Cook Farm Supply Company manufactures
Cook Farm Supply Company manufactures - Accounting
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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.
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 $297,000 in quarter 1 and $439,500 in quarter
2.
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| Sales Budget |
| For the Six Months Ending June 30, 2017 |
| Quarter |
| ....... ....... .......... ....... ... ..1 .... ..... ....2..... ......Six Months |
| Expected unit sales........40,000 .... …56,000 .....96,000 |
| Unit selling price.......... ....$60 ..... ..... ...$60 ....... ..$60 |
| Total sales ......... ...... .$2,400,000 $3,360,000 ..$5,760,000 |
| cock FARM SUPPLY COMPANY |
| Production Budget-Snare |
| For the Six Months Ending June 30, 2017 |
| Quarter |
| ..... ...... ....... ....... ....... ........... ........ ..1 .... ..... ....2..... ...Six Months |
| Expected unit sales........ ......... ...... ........40,000 …56,000 |
| Add: Desired ending finished goods units..15,000 ...18,000 |
| Total required units......... ........ ....... ....... ..55,000 …74,000 |
| Less: Beginning finished goods units....... .8,000 ... 15,000 |
| Required production units..... ..... ....... .... 47,000 ....59,000 …106,000 |
| cock FARM SUPPLY COMPANY |
| Direct Materials Budget--Gumm |
| For the Six Months Ending June 30, 2017 |
| ..... ...... ....... ....... ....... ....... ......... ..1 .... ..... ....2..... ...Six Months |
| Units to be produced....... ...... ..... ...... ..47,000 ... ..59,000 |
| Direct materials per unit.......... ...... ...... ..... ..x4 ...... ...... ....x4 |
| Total pounds needed for production.......188,000 .... 236,000 |
| Add: Desired ending direct materials .......10,000 ..... ..13,000 |
| Total materials required........ ....... ....... ...198,000 .....249,000 |
| Less: Beginning direct material ...... ........ ....9,000 ........10,000 |
| Direct materials purchases....... ....... ....... 189,000 ..... 239,000 |
| Cost per pound.......... ........ ......... ....... ......x$4 ....... ...... ....x$4 |
| Total cost of direct materials purchases...$756,000 ..$956,000 ...$1,712,000 |
| cock FARM SUPPLY COMPANY |
| Direct Labor Budget |
| For the Six Months Ending June 30, 2017 |
| ..... ...... ....... ....... ....... ....... ...1 .... ..... ....2..... ...Six Months |
| Units to be produced....... ...... 47,000 ... ..59,000 |
| Direct labor time (hours) per unit...... x1/4 ...... ...1/4 |
| Total required direct labor hours.... 11,750 ....14,750 |
| Direct labor cost per hour......... ....... .$16 ..... ....$16 |
| Total direct labor cost.. ..... ...... ..$188,000 ..$236,000 $424,000 |
| cock FARM SUPPLY COMPANY |
| Selling and Administrative Expense Budget |
| For the Six Months Ending June 30, 2017 |
| ..... ...... ....... ....... ....... ..1 .... ..... ....2..... ...Six Months |
| Budgeted sales in units …40,000 .......56,000 |
| Variable (.15 x sales).....$360,000 ..$504,000 |
| Fixed...... ......... ...... ..........175,000 ...175,000 |
| Total........ ......... ...... ......$535,000 ...$679,000 ...$1,214,000 |
| cock FARM SUPPLY COMPANY |
| Budgeted Income Statement |
| For the Six Months Ending June 30, 2017 |
| Sales....... .......... ....... ........ ....... ....... ....... $5,760,000 |
| Cost of goods sold (96,000 X $35)*..... .3,360,500 |
| Gross profit........ ........ ....... ........ ....... ......... 2,400,000 |
| Selling and administrative expenses ........ ... $1,214,000 |
| Income from operations........ ....... ...... ...... .... 1,186,000 |
| Income tax expense (30%)......... ....... ...... .... 355,800 |
| Net income .......... ......... ....... ............ ...... ... $ 830,200 |
| *(4 pounds x $4.00 = $16.00 |
| 6 pounds x $1.50 = $9.00 |
| 1/4 hour x $16.00 = $ 4 |
| 150% of direct labor cost i.e. $4= 6 |
| Total =$16+$9+$4+$6= $35 |
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