P22-1A Prepare budgeted income statement and supporting budgets. 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, 40,000 bags; quarter 2, 56,000 bags. Selling price is $60 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) 8,000 15,000 18,000 Gumm (pounds) 9,000 10,000 13,000 Tarr (pounds) 14,000 20,000 25,000 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 $175,000 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 $297,000 in quarter 1 and $439,500 in quarter 2. Instructions Prepare the budgeted multi-step income statement for the first 6 months and all required operating budgets by quarters. (Note: Use variable and fixed in the selling and administrative expense budget.) Do not prepare the manufacturing overhead budget or the direct materials budget for Tarr. NOTE: Enter a number in cells requesting a value; enter either a number or a formula in cells with a "?" . COOK FARM SUPPLY COMPANY Sales Budget For the Six Months Ending June 30, 2020 Quarter Six 1 2 Months Expected unit sales Value Value ? Unit selling price $60 $60 $60 Total sales ? ? ? COOK FARM SUPPLY COMPANY Production Budget For the Six Months Ending June 30, 2020 Quarter Six 1 2 Months Expected unit sales Value Value Add: Desired ending finished goods units Value Value Total required units ? ? Less: Beginning finished goods units Value Value Required production units ? ? ? COOK FARM SUPPLY COMPANY Direct Materials Budget - Gumm For the Six Months Ending June 30, 2020 Quarter Six 1 2 Months Units to be produced Value Value Direct materials per unit (lbs.) X 4lbs X 4lbs Total pounds needed for production ? ? Add: Desired ending direct materials (lbs.) Value Value Total materials required ? ? Less: Beginning direct materials (lbs.) Value Value Direct materials purchases ? ? Cost per pound X $3.80 X $3.80 Total cost of direct materials purchases ? ? ? COOK FARM SUPPLY COMPANY Direct Labor Budget For the Six Months Ending June 30, 2020 Quarter Six 1 2 Months Units to be produced Value Value Direct labor hours per unit X 1/4 X 1/4 Total required direct labor hours ? ? Direct labor cost per hour X $16 X $16 Total direct labor cost ? ? ? COOK FARM SUPPLY COMPANY Selling and Administrative Budget For the Six Months Ending June 30, 2020 Quarter Six 1 2 Months Budgeted sales in units Value Value ? Variable (.15 x sales) Value Value ? Fixed Value Value ? Total ? ? ? COOK FARM SUPPLY COMPANY Budgeted Income Statement For the Six Months Ending June 30, 2020 Sales revenue ? Cost of goods sold ? Gross Profit ? Selling and administrative expenses Value Income from operations ? Interest expense Value Income before income tax ? Income tax expense (30%) ? Net income ? Cost per Bag Cost Element Quantity Unit Cost Total Direct Materials Gumm 4 pounds Value ? Tarr 6 pounds Value ? Direct Labor 1/4 hour Value ? Manufacturing overhead ? (125% of direct labor cost) Total ? After you have completed P22-1A consider the following additional question. 1. Assume that the expected unit sales in Quarter 1 changed to 36,000 bags of Snare. Also assume that the amount of direct material (Gumm) used changed to 5 pounds per bag; and, that the direct labor rate changed to $18 per hour. Revise the budgets and budgeted income statement to reflect these changes.

P22-1A Prepare budgeted income statement and supporting budgets. 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, 40,000 bags; quarter 2, 56,000 bags. Selling price is $60 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) 8,000 15,000 18,000 Gumm (pounds) 9,000 10,000 13,000 Tarr (pounds) 14,000 20,000 25,000 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 $175,000 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 $297,000 in quarter 1 and $439,500 in quarter 2. Instructions Prepare the budgeted multi-step income statement for the first 6 months and all required operating budgets by quarters. (Note: Use variable and fixed in the selling and administrative expense budget.) Do not prepare the manufacturing overhead budget or the direct materials budget for Tarr. NOTE: Enter a number in cells requesting a value; enter either a number or a formula in cells with a "?" . COOK FARM SUPPLY COMPANY Sales Budget For the Six Months Ending June 30, 2020 Quarter Six 1 2 Months Expected unit sales Value Value ? Unit selling price $60 $60 $60 Total sales ? ? ? COOK FARM SUPPLY COMPANY Production Budget For the Six Months Ending June 30, 2020 Quarter Six 1 2 Months Expected unit sales Value Value Add: Desired ending finished goods units Value Value Total required units ? ? Less: Beginning finished goods units Value Value Required production units ? ? ? COOK FARM SUPPLY COMPANY Direct Materials Budget - Gumm For the Six Months Ending June 30, 2020 Quarter Six 1 2 Months Units to be produced Value Value Direct materials per unit (lbs.) X 4lbs X 4lbs Total pounds needed for production ? ? Add: Desired ending direct materials (lbs.) Value Value Total materials required ? ? Less: Beginning direct materials (lbs.) Value Value Direct materials purchases ? ? Cost per pound X $3.80 X $3.80 Total cost of direct materials purchases ? ? ? COOK FARM SUPPLY COMPANY Direct Labor Budget For the Six Months Ending June 30, 2020 Quarter Six 1 2 Months Units to be produced Value Value Direct labor hours per unit X 1/4 X 1/4 Total required direct labor hours ? ? Direct labor cost per hour X $16 X $16 Total direct labor cost ? ? ? COOK FARM SUPPLY COMPANY Selling and Administrative Budget For the Six Months Ending June 30, 2020 Quarter Six 1 2 Months Budgeted sales in units Value Value ? Variable (.15 x sales) Value Value ? Fixed Value Value ? Total ? ? ? COOK FARM SUPPLY COMPANY Budgeted Income Statement For the Six Months Ending June 30, 2020 Sales revenue ? Cost of goods sold ? Gross Profit ? Selling and administrative expenses Value Income from operations ? Interest expense Value Income before income tax ? Income tax expense (30%) ? Net income ? Cost per Bag Cost Element Quantity Unit Cost Total Direct Materials Gumm 4 pounds Value ? Tarr 6 pounds Value ? Direct Labor 1/4 hour Value ? Manufacturing overhead ? (125% of direct labor cost) Total ? After you have completed P22-1A consider the following additional question. 1. Assume that the expected unit sales in Quarter 1 changed to 36,000 bags of Snare. Also assume that the amount of direct material (Gumm) used changed to 5 pounds per bag; and, that the direct labor rate changed to $18 per hour. Revise the budgets and budgeted income statement to reflect these changes.

FINANCIAL ACCOUNTING

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ISBN:9781259964947

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Publisher:Libby

Chapter1: Financial Statements And Business Decisions

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P22-1A Prepare budgeted income statement and supporting budgets.
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, 40,000 bags; quarter 2, 56,000 bags. Selling price is $60 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)	8,000	15,000	18,000
	Gumm (pounds)	9,000	10,000	13,000
	Tarr (pounds)	14,000	20,000	25,000

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 $175,000 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 $297,000 in quarter 1 and $439,500 in quarter 2.

Instructions
Prepare the budgeted multi-step income statement for the first 6 months and all required operating budgets by
quarters. (Note: Use variable and fixed in the selling and administrative expense budget.) Do not
prepare the manufacturing overhead budget or the direct materials budget for Tarr.
NOTE: Enter a number in cells requesting a value; enter either a number or a formula in cells with a "?" .



COOK FARM SUPPLY COMPANY
Sales Budget
For the Six Months Ending June 30, 2020
		Quarter	Six
		1	2	Months
Expected unit sales	Value	Value	?
Unit selling price	$60	$60	$60
Total sales	?	?	?


COOK FARM SUPPLY COMPANY
Production Budget
For the Six Months Ending June 30, 2020
		Quarter	Six
		1	2	Months
Expected unit sales	Value	Value
Add: Desired ending finished goods units	Value	Value
Total required units	?	?
Less: Beginning finished goods units	Value	Value
Required production units	?	?	?


COOK FARM SUPPLY COMPANY
Direct Materials Budget - Gumm
For the Six Months Ending June 30, 2020
		Quarter	Six
		1	2	Months
Units to be produced	Value	Value
Direct materials per unit (lbs.)	X 4lbs	X 4lbs
Total pounds needed for production	?	?
Add: Desired ending direct materials (lbs.)	Value	Value
Total materials required	?	?
Less: Beginning direct materials (lbs.)	Value	Value
Direct materials purchases	?	?
Cost per pound	X $3.80	X $3.80
Total cost of direct materials purchases	?	?	?


COOK FARM SUPPLY COMPANY
Direct Labor Budget
For the Six Months Ending June 30, 2020
		Quarter	Six
		1	2	Months
Units to be produced	Value	Value
Direct labor hours per unit	X 1/4	X 1/4
Total required direct labor hours	?	?
Direct labor cost per hour	X $16	X $16
Total direct labor cost	?	?	?


COOK FARM SUPPLY COMPANY
Selling and Administrative Budget
For the Six Months Ending June 30, 2020
		Quarter	Six
		1	2	Months
Budgeted sales in units	Value	Value	?

Variable (.15 x sales)	Value	Value	?
Fixed	Value	Value	?
Total		?	?	?


COOK FARM SUPPLY COMPANY
Budgeted Income Statement
For the Six Months Ending June 30, 2020
Sales revenue	?
Cost of goods sold	?
Gross Profit	?
Selling and administrative expenses	Value
Income from operations	?
Interest expense	Value
Income before income tax	?
Income tax expense (30%)	?
Net income	?


	Cost per Bag

	Cost Element	Quantity	Unit Cost	Total
	Direct Materials
	Gumm	4 pounds	Value	?
	Tarr	6 pounds	Value	?
	Direct Labor	1/4 hour	Value	?
	Manufacturing overhead			?
	(125% of direct labor cost)
	Total			?



After you have completed P22-1A consider the following additional question.
1.	Assume that the expected unit sales in Quarter 1 changed to 36,000 bags of Snare. Also assume that
	the amount of direct material (Gumm) used changed to 5 pounds per bag; and, that the direct labor rate
	changed to $18 per hour. Revise the budgets and budgeted income statement to reflect these changes.

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