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.)
Part 1
Prepare the sales budget.
| COOK FARM SUPPLY COMPANY Sales Budget choose the accounting period For the Six Months Ending June 30, 2020 June 30, 2020 For the Quarter Ending June 30, 2020 |
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| Quarter | Six Months |
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| 1 | 2 | |||||
| Expected unit sales | enter a number of units | enter a number of units | enter a number of units | |||
| Unit selling price | $enter a dollar amount | $enter a dollar amount | $enter a dollar amount | |||
| Total sales | $enter a total dollar amount | $enter a total dollar amount | $enter a total dollar amount | |||
Prepare the production budget.
| COOK FARM SUPPLY COMPANY Production Budget choose the accounting period For the Quarter Ending June 30, 2020 June 30, 2020 For the Six Months Ending June 30, 2020 |
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| Quarter | Six Months |
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| 1 | 2 | |||||
| select an opening production budget item Beginning Finished Goods Units Total Direct Labor Cost Beginning Direct Materials Total Materials Required Direct Materials per Unit Direct Labor Time per Unit Required Production Units Desired Ending Finished Goods Units Direct Materials Purchases Desired Ending Direct Materials Total Required Direct Labor Hours Total Pounds Needed for Production Total Required Units Cost per Pound Direct Labor Cost per Hour Expected Unit Sales Total Cost of Direct Materials Purchases | enter a number of units | enter a number of units | ||||
| select between addition and deduction Add Less : select a production budget item Desired Ending Finished Goods Units Total Pounds Needed for Production Beginning Finished Goods Units Total Direct Labor Cost Total Required Units Beginning Direct Materials Total Required Direct Labor Hours Expected Unit Sales Direct Materials per Unit Desired Ending Direct Materials Direct Labor Cost per Hour Total Cost of Direct Materials Purchases Required Production Units Direct Materials Purchases Direct Labor Time per Unit Total Materials Required Cost per Pound | enter a number of units | enter a number of units | ||||
| select a summarizing line for the first part Direct Materials Purchases Direct Labor Cost per Hour Cost per Pound Desired Ending Finished Goods Units Direct Labor Time per Unit Expected Unit Sales Direct Materials per Unit Total Cost of Direct Materials Purchases Desired Ending Direct Materials Total Pounds Needed for Production Beginning Direct Materials Total Materials Required Total Required Units Total Direct Labor Cost Total Required Direct Labor Hours Beginning Finished Goods Units Required Production Units | enter a total number of units for the first part | enter a total number of units for the first part | ||||
| select between addition and deduction Add Less : select a production budget item Total Pounds Needed for Production Direct Labor Cost per Hour Beginning Direct Materials Beginning Finished Goods Units Total Direct Labor Cost Direct Labor Time per Unit Expected Unit Sales Desired Ending Direct Materials Direct Materials per Unit Required Production Units Cost per Pound Desired Ending Finished Goods Units Total Required Direct Labor Hours Direct Materials Purchases Total Cost of Direct Materials Purchases Total Materials Required Total Required Units | enter a number of units | enter a number of units | ||||
| select a closing production budget item Desired Ending Finished Goods Units Beginning Direct Materials Total Materials Required Direct Materials per Unit Expected Unit Sales Total Pounds Needed for Production Total Required Direct Labor Hours Desired Ending Direct Materials Cost per Pound Total Required Units Total Cost of Direct Materials Purchases Total Direct Labor Cost Beginning Finished Goods Units Required Production Units Direct Labor Time per Unit Direct Materials Purchases Direct Labor Cost per Hour | enter a total number of units | enter a total number of units | enter a total number of units | |||
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Part 2
Prepare the direct materials budget. (Round Cost per pound answers to 2 decimal places, e.g. 52.70.)
| COOK FARM SUPPLY COMPANY Direct Materials Budget—Gumm choose the accounting period June 30, 2020 For the Quarter Ending June 30, 2020 For the Six Months Ending June 30, 2020 |
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| Quarter | Six Months |
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| 1 | 2 | |||||
| select an opening direct materials budget item Direct Materials Purchases Total Direct Labor Cost Total Required Direct Labor Hours Direct Labor Cost per Hour Expected Unit Sales Total Pounds Needed for Production Cost per Pound Total Cost of Direct Materials Purchases Desired Ending Direct Materials (Pounds) Direct Labor Time (Hours) per Unit Total Required Units Desired Ending Finished Goods Units Beginning Finished Goods Units Beginning Direct Materials (Pounds) Direct Materials per Unit Units to be Produced Total Materials Required | enter a number of units | enter a number of units | ||||
| select an item Units to be Produced Desired Ending Direct Materials (Pounds) Direct Labor Cost per Hour Total Pounds Needed for Production Direct Labor Time (Hours) per Unit Total Direct Labor Cost Direct Materials Purchases Beginning Finished Goods Units Cost per Pound Total Cost of Direct Materials Purchases Total Required Direct Labor Hours Total Required Units Direct Materials per Unit Total Materials Required Desired Ending Finished Goods Units Beginning Direct Materials (Pounds) Expected Unit Sales | enter the amount of pounds | enter the amount of pounds | ||||
| select a summarizing line for the first part Direct Materials per Unit Desired Ending Finished Goods Units Total Required Direct Labor Hours Cost per Pound Expected Unit Sales Total Required Units Total Direct Labor Cost Total Pounds Needed for Production Units to be Produced Direct Materials Purchases Total Materials Required Beginning Finished Goods Units Direct Labor Time (Hours) per Unit Desired Ending Direct Materials (Pounds) Direct Labor Cost per Hour Total Cost of Direct Materials Purchases Beginning Direct Materials (Pounds) | enter a total amount of pounds for the first part | enter a total amount of pounds for the first part | ||||
| select between addition and deduction Add Less : select an item Beginning Finished Goods Units Total Direct Labor Cost Total Pounds Needed for Production Expected Unit Sales Direct Materials per Unit Total Required Direct Labor Hours Total Required Units Desired Ending Finished Goods Units Direct Labor Time (Hours) per Unit Total Materials Required Direct Labor Cost per Hour Direct Materials Purchases Cost per Pound Desired Ending Direct Materials (Pounds) Beginning Direct Materials (Pounds) Units to be Produced Total Cost of Direct Materials Purchases | enter the amount of pounds | enter the amount of pounds | ||||
| select a summarizing line for the second part Desired Ending Direct Materials (Pounds) Total Required Units Beginning Finished Goods Units Total Required Direct Labor Hours Beginning Direct Materials (Pounds) Units to be Produced Direct Labor Time (Hours) per Unit Direct Materials Purchases Direct Materials per Unit Direct Labor Cost per Hour Desired Ending Finished Goods Units Expected Unit Sales Total Direct Labor Cost Total Pounds Needed for Production Total Cost of Direct Materials Purchases Total Materials Required Cost per Pound | enter a total amount of pounds for the second part | enter a total amount of pounds for the second part | ||||
| select between addition and deduction Add Less : select an item Units to be Produced Direct Labor Cost per Hour Desired Ending Finished Goods Units Total Materials Required Total Pounds Needed for Production Total Cost of Direct Materials Purchases Direct Materials Purchases Direct Labor Time (Hours) per Unit Total Required Direct Labor Hours Total Required Units Beginning Direct Materials (Pounds) Beginning Finished Goods Units Cost per Pound Direct Materials per Unit Desired Ending Direct Materials (Pounds) Total Direct Labor Cost Expected Unit Sales | enter the amount of pounds | enter the amount of pounds | ||||
| select a summarizing line for the third part Cost per Pound Units to be Produced Direct Labor Time (Hours) per Unit Total Required Direct Labor Hours Total Pounds Needed for Production Direct Materials Purchases Beginning Finished Goods Units Beginning Direct Materials (Pounds) Expected Unit Sales Desired Ending Direct Materials (Pounds) Total Required Units Direct Labor Cost per Hour Total Materials Required Direct Materials per Unit Total Cost of Direct Materials Purchases Total Direct Labor Cost Desired Ending Finished Goods Units | enter a total amount of pounds for the third part | enter a total amount of pounds for the third part | ||||
| select an item Total Pounds Needed for Production Units to be Produced Beginning Direct Materials (Pounds) Desired Ending Direct Materials (Pounds) Direct Materials per Unit Direct Labor Cost per Hour Total Required Direct Labor Hours Expected Unit Sales Beginning Finished Goods Units Direct Labor Time (Hours) per Unit Total Materials Required Total Required Units Direct Materials Purchases Total Cost of Direct Materials Purchases Total Direct Labor Cost Desired Ending Finished Goods Units Cost per Pound | $enter a dollar amount | $enter a dollar amount | ||||
| select a closing direct materials budget item Desired Ending Direct Materials (Pounds) Total Cost of Direct Materials Purchases Expected Unit Sales Total Direct Labor Cost Direct Labor Time (Hours) per Unit Total Materials Required Total Pounds Needed for Production Cost per Pound Beginning Finished Goods Units Direct Labor Cost per Hour Units to be Produced Total Required Units Direct Materials Purchases Desired Ending Finished Goods Units Direct Materials per Unit Beginning Direct Materials (Pounds) Total Required Direct Labor Hours | $enter a total dollar amount | $enter a total dollar amount | $enter a total dollar amount | |||
Prepare the direct labor budget. (Enter Direct labor time per unit in proportion to hours, e.g. for 45 minutes the proportion will be 0.75.)
| COOK FARM SUPPLY COMPANY Direct Labor Budget choose the accounting period For the Six Months Ending June 30, 2020 June 30, 2020 For the Quarter Ending June 30, 2020 |
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| Quarter | Six Months |
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| 1 | 2 | |||||
| select an opening labor budget item Direct Labor Cost per Hour Units to be Produced Desired Ending Finished Goods Units Total Direct Labor Cost Direct Materials per Unit Desired Ending Direct Materials (Pounds) Beginning Direct Materials (Pounds) Total Pounds Needed for Production Beginning Finished Goods Units Expected Unit Sales Direct Materials Purchases Total Required Units Total Required Direct Labor Hours Total Cost of Direct Materials Purchases Cost per Pound Total Materials Required Direct Labor Time (Hours) per Unit | enter a number of units | enter a number of units | ||||
| select a labor budget item Total Required Direct Labor Hours Total Pounds Needed for Production Beginning Finished Goods Units Total Materials Required Direct Materials per Unit Total Cost of Direct Materials Purchases Desired Ending Direct Materials (Pounds) Total Direct Labor Cost Direct Materials Purchases Beginning Direct Materials (Pounds) Direct Labor Cost per Hour Desired Ending Finished Goods Units Units to be Produced Cost per Pound Total Required Units Expected Unit Sales Direct Labor Time (Hours) per Unit | enter a number of hours | enter a number of hours | ||||
| select a summarizing line for the first part Direct Materials Purchases Total Required Direct Labor Hours Total Cost of Direct Materials Purchases Desired Ending Finished Goods Units Total Pounds Needed for Production Total Direct Labor Cost Total Required Units Units to be Produced Direct Materials per Unit Total Materials Required Cost per Pound Beginning Finished Goods Units Expected Unit Sales Desired Ending Direct Materials (Pounds) Beginning Direct Materials (Pounds) Direct Labor Time (Hours) per Unit Direct Labor Cost per Hour | enter a total number of hours for the first part | enter a total number of hours for the first part | ||||
| select a labor budget item Units to be Produced Total Materials Required Beginning Direct Materials (Pounds) Direct Labor Time (Hours) per Unit Direct Materials Purchases Total Required Units Cost per Pound Beginning Finished Goods Units Total Required Direct Labor Hours Total Direct Labor Cost Desired Ending Finished Goods Units Total Pounds Needed for Production Total Cost of Direct Materials Purchases Direct Labor Cost per Hour Direct Materials per Unit Desired Ending Direct Materials (Pounds) Expected Unit Sales | $enter a dollar amount | $enter a dollar amount | ||||
| select a closing labor budget item Total Materials Required Units to be Produced Total Pounds Needed for Production Desired Ending Direct Materials (Pounds) Cost per Pound Total Required Direct Labor Hours Beginning Finished Goods Units Total Required Units Direct Labor Time (Hours) per Unit Expected Unit Sales Direct Materials Purchases Total Cost of Direct Materials Purchases Direct Labor Cost per Hour Desired Ending Finished Goods Units Beginning Direct Materials (Pounds) Direct Materials per Unit Total Direct Labor Cost | $enter a total dollar amount | $enter a total dollar amount | $enter a total dollar amount | |||
Prepare the selling and administrative expense budget.
| COOK FARM SUPPLY COMPANY Selling and Administrative Expense Budget choose the accounting period For the Quarter Ending June 30, 2020 June 30, 2020 For the Six Months Ending June 30, 2020 |
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| Quarter | Six Months |
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| 1 | 2 | |||||
| select an item Budgeted sales in units Total Fixed Cost Variable Cost | enter a total number of units | enter a total number of units | enter a total number of units | |||
| select an item Variable Cost Budgeted sales in units Fixed Cost Total | $enter a dollar amount | $enter a dollar amount | $enter a dollar amount | |||
| select an item Total Fixed Cost Variable Cost Budgeted sales in units | enter a dollar amount | enter a dollar amount | enter a dollar amount | |||
| select a closing budget item Budgeted sales in units Total Variable Cost Fixed Cost | $enter a total dollar amount | $enter a total dollar amount | $enter a total dollar amount | |||
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Part 3
Prepare the budgeted multiple-step income statement for the first 6 months. (Round intermediate calculations to 2 decimal places and final answer to 0 decimal places, e.g. 1,255.)
| COOK FARM SUPPLY COMPANY Budgeted Income Statement choose the accounting period June 30, 2020 For the Six Months Ending June 30, 2020 For the Quarter Ending June 30, 2020 |
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| select an income statement item Sales Ending Inventory Gross Profit Cost of Goods Sold Interest Expense Operating Expenses Net Income / (Loss) Income Before Income Tax Income from Operations Beginning Inventory Total Operating Expenses Income Tax Expense Purchases Selling and Administrative Expenses | $enter a dollar amount | |
| select an income statement item Operating Expenses Beginning Inventory Total Operating Expenses Net Income / (Loss) Purchases Sales Cost of Goods Sold Selling and Administrative Expenses Income from Operations Income Tax Expense Ending Inventory Income Before Income Tax Interest Expense Gross Profit | enter a dollar amount | |
| select a summarizing line for the first part Ending Inventory Beginning Inventory Income from Operations Income Tax Expense Sales Net Income / (Loss) Income Before Income Tax Total Operating Expenses Interest Expense Cost of Goods Sold Selling and Administrative Expenses Purchases Gross Profit Operating Expenses | enter a total amount for the first part | |
| select an income statement item Operating Expenses Sales Total Operating Expenses Income from Operations Ending Inventory Gross Profit Net Income / (Loss) Beginning Inventory Interest Expense Purchases Income Before Income Tax Cost of Goods Sold Income Tax Expense Selling and Administrative Expenses | enter a dollar amount | |
| select a summarizing line for the second part Ending Inventory Operating Expenses Income from Operations Purchases Beginning Inventory Gross Profit Interest Expense Selling and Administrative Expenses Total Operating Expenses Net Income / (Loss) Sales Cost of Goods Sold Income Before Income Tax Income Tax Expense | enter a total amount for the second part | |
| select an income statement item Cost of Goods Sold Ending Inventory Net Income / (Loss) Selling and Administrative Expenses Operating Expenses Purchases Interest Expense Income Before Income Tax Beginning Inventory Income from Operations Sales Total Operating Expenses Income Tax Expense Gross Profit | enter a dollar amount | |
| select a summarizing line for the third part Operating Expenses Income from Operations Selling and Administrative Expenses Purchases Beginning Inventory Cost of Goods Sold Ending Inventory Net Income / (Loss) Total Operating Expenses Income Before Income Tax Interest Expense Income Tax Expense Gross Profit Sales | enter a total amount for the third part | |
| select an income statement item Income from Operations Net Income / (Loss) Income Before Income Tax Beginning Inventory Sales Income Tax Expense Purchases Cost of Goods Sold Total Operating Expenses Ending Inventory Selling and Administrative Expenses Interest Expense Gross Profit Operating Expenses | enter a dollar amount | |
| select a closing name for the budgeted income statement Income Tax Expense Cost of Goods Sold Gross Profit Selling and Administrative Expenses Total Operating Expenses Income from Operations Sales Beginning Inventory Net Income / (Loss) Purchases Interest Expense Income Before Income Tax Ending Inventory Operating Expenses | $enter a total net income or loss amount | |
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