Company manufactures and sells a pesticide

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Reference no: EM13925564

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 2017.

1.		Sales: quarter 1, 29,300 bags; quarter 2, 42,400 bags. Selling price is $63 per bag.
2.		Direct materials: each bag of Snare requires 4 pounds of Gumm at a cost of $3.8 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)		8,500	12,200	18,500
Gumm (pounds)		9,300	10,400	13,100
Tarr (pounds)		14,400	20,500	25,300
4.	Direct labor: direct labor time is 15 minutes per bag at an hourly rate of $14 per hour.
5.	Selling and administrative expenses are expected to be 15% of sales plus $176,000 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 $298,000 in quarter 1 and $423,500 in quarter 2.

Prepare the production budget.

Reference no: EM13925564

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