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 2022. 1. 2. 3. Type of Inventory January 1 Snare (bags) Gumm (pounds) Tarr (pounds) 4. 5. 6. Sales: quarter 1,40,000 bags; quarter 2, 56,000 bags. Selling price is $60 per bag. 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 $1.50 per pound. Desired inventory levels: 7. 8,000 April 1 15,000 9,000 10,000 July 1 18,000 13,000 14,000 20,000 25,000 Direct labor: direct labor time is 15 minutes per bag at an hourly rate of $16 per hour. Selling and administrative expenses are expected to be 15% of sales plus $175,000 per quarter. Interest expense is $100,000. 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 $297,000 in quarter 1 and $439,500 in quarter 2. (Note: Do not prepare the manufacturing overhead budget or the direct materials budget for Tarr.)

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 2022. 1. 2. 3. Type of Inventory January 1 Snare (bags) Gumm (pounds) Tarr (pounds) 4. 5. 6. Sales: quarter 1,40,000 bags; quarter 2, 56,000 bags. Selling price is $60 per bag. 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 $1.50 per pound. Desired inventory levels: 7. 8,000 April 1 15,000 9,000 10,000 July 1 18,000 13,000 14,000 20,000 25,000 Direct labor: direct labor time is 15 minutes per bag at an hourly rate of $16 per hour. Selling and administrative expenses are expected to be 15% of sales plus $175,000 per quarter. Interest expense is $100,000. 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 $297,000 in quarter 1 and $439,500 in quarter 2. (Note: Do not prepare the manufacturing overhead budget or the direct materials budget for Tarr.)

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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