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Cook Farm Supply Company manufactures and sells a pesticidecalled Snare. The following data are available for preparingbudgets for Snare for the first 2 quarters of 2017.

1. Sales: quarter 1, 29,400 bags; quarter 2, 42,500 bags. Sellingprice is $63 per bag.
2. Direct materials: each bag of Snare requires 4 pounds of Gummat a cost of $3.8 per pound and 6 pounds of Tarr at $1.75 perpound.
3. Desired inventory levels:

Type of Inventory

January 1

April 1

July 1

Snare (bags)8,10012,20018,100Gumm (pounds)9,50010,10013,200Tarr(pounds)14,20020,50025,400

4. Direct labor: direct labor time is 15 minutes per bag at anhourly rate of $14 per hour.
5. Selling and administrative expenses are expected to be 15% ofsales plus $179,000 per quarter.
6. Interest expense is $100,000.
7. Income taxes are expected to be 30% of income before incometaxes.

Your assistant has prepared two budgets: (1) the manufacturingoverhead budget shows expected costs to be 125% of direct laborcost, and (2) the direct materials budget for Tarr shows the costof Tarr purchases to be $301,000 in quarter 1 and $426,500 inquarter 2.

a) Prepare the budgeted multiple-step income statement for thefirst 6 months.

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Sixta Kovacek
Sixta KovacekLv2
28 Sep 2019

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