arter 2, 43,400 bags. Selling price i re requires 4 pounds of Gumm at a
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Struggling to figure this out .Can you explain in the same graph
![Crane 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 2022.
1.
Sales: quarter 1, 28,000 bags; quarter 2, 43,400 bags. Selling price is $63 per bag.
Direct materials: each bag of Snare requires 4 pounds of Gumm at a cost of $4 per pound and 6 pounds of
2.
Tarr at $1.50 per pound.
3.
Desired inventory levels:
Type of Inventory
January 1
April 1
July 1
Snare (bags)
8,400
12,500
18,400
Gumm (pounds)
9,500
10,300
13,400
Tarr (pounds)
14,500
20,100
25,100
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 $177,000 per quarter.
6.
Interest expense is $100,000.
7.
Income taxes are expected to be 20% 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 $424,500 in quarter 2.
(Note: Do not prepare the manufacturing overhead budget or the direct materials budget for Tarr.)](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F0d7c7df4-4531-436c-8dac-594063fe2081%2F30ff31f8-d80d-4037-9f98-068b6dd89cee%2Flwog5nb_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Crane 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 2022.
1.
Sales: quarter 1, 28,000 bags; quarter 2, 43,400 bags. Selling price is $63 per bag.
Direct materials: each bag of Snare requires 4 pounds of Gumm at a cost of $4 per pound and 6 pounds of
2.
Tarr at $1.50 per pound.
3.
Desired inventory levels:
Type of Inventory
January 1
April 1
July 1
Snare (bags)
8,400
12,500
18,400
Gumm (pounds)
9,500
10,300
13,400
Tarr (pounds)
14,500
20,100
25,100
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 $177,000 per quarter.
6.
Interest expense is $100,000.
7.
Income taxes are expected to be 20% 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 $424,500 in quarter 2.
(Note: Do not prepare the manufacturing overhead budget or the direct materials budget for Tarr.)
![CRANE FARM SUPPLY COMPANY
Budgeted Income Statement
$
$
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Transcribed Image Text:CRANE FARM SUPPLY COMPANY
Budgeted Income Statement
$
$
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