Danner farm supply company manufactures and sells a

Reference no: EM13596527

Danner 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 2009.

1. Sales: Quarter 1, 28,000 bags; quarter 2, 42,000 bags. Selling price is $60 per bag.
2. Direct materials: Each bag of Snare requires 4 pounds of Gumm at a cost of $4 per pound and 6 pounds of Tarr at $1.50 per pound.
3. Desired inventory levels:
Type of Inventory 1-Jan 1-Apr 1-Jul
Snare (bags) 8,000 12,000 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 $14 per hour.
5. Selling and administrative expenses are expected to be 15% of sales plus $175,000 per quarter.
6. Income taxes are expected to be 30% of income from operations.

Your assistant has prepared two budgets: (1) the manufacturing overhead budget shows expected costs to be 150% of direct labor costs. (2) The direct materials budget for Tarr shows the costs of Tarr purchases to be $297.000 in quarter 1 and $439,500 in quarter 2.
Net income $600,250 Cost per bag $33.75.

Instructions:

Prepare the budget income statement for the first 6 months and all required operating budgets by quarters.Do not prepare the manufacturing overhead budget or the direct materials budget for Tarr.

Reference no: EM13596527

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