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, 28,000 bags; quarter 2, 43,400 bags. Selling price is $63 per bag. 2. Direct materials: each bag of Snare requires 4 pounds of Gumm at a cost of $3.80 per pound and 6 pounds of 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 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 $424,500 in quarter 2. (Note: Do not prepare the manufacturing overhead budget or the direct materials budget for Tarr.) Prepare the sales budget.
Master Budget
A master budget can be defined as an estimation of the revenue earned or expenses incurred over a specified period of time in the future and it is generally prepared on a periodic basis which can be either monthly, quarterly, half-yearly, or annually. It helps a business, an organization, or even an individual to manage the money effectively. A budget also helps in monitoring the performance of the people in the organization and helps in better decision-making.
Sales Budget and Selling
A budget is a financial plan designed by an undertaking for a definite period in future which acts as a major contributor towards enhancing the financial success of the business undertaking. The budget generally takes into account both current and future income and expenses.
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.
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1. |
Sales: quarter 1, 28,000 bags; quarter 2, 43,400 bags. Selling price is $63 per bag. |
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2. |
Direct materials: each bag of Snare requires 4 pounds of Gumm at a cost of $3.80 per pound and 6 pounds of Tarr at $1.50 per pound. |
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3. |
Desired inventory levels: |
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Type of Inventory |
January 1 |
April 1 |
July 1 |
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Snare (bags) |
8,400 |
12,500 |
18,400 |
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Gumm (pounds) |
9,500 |
10,300 |
13,400 |
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Tarr (pounds) |
14,500 |
20,100 |
25,100 |
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4. |
Direct labor: direct labor time is 15 minutes per bag at an hourly rate of $16 per hour. |
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5. |
Selling and administrative expenses are expected to be 15% of sales plus $177,000 per quarter. |
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6. |
Interest expense is $100,000. |
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7. |
Income taxes are expected to be 30% of income before income taxes. |
Your assistant has prepared two budgets: (1) the manufacturing
(Note: Do not prepare the manufacturing overhead budget or the direct materials budget for Tarr.)
Prepare the sales budget.
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