Glendo farm supply company manufactures and sells a

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Glendo 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 2014. 1. Sales: Quarter 1, 29900 bags; quarter 2, 43,500 bags. Selling price is $63 per bag. 2. Direct materials: Each bag of Snare requires 5 pounds of Gumm at a cost of $3.80 per pound and 7 pounds of Tarr at $1.75 per pound. 3. Desired inventory levels: Type of Inventory January 1 April 1 July 1 Snare (bags) 8,400 12,200 18,200 Gumm (pounds) 9,500 10,400 13,300 Tarr (pounds) 14,100 20,100 25,100 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 $177,000 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 cost. (2) The direct materials budget for Tarr shows the cost of Tarr purchases to be $302,000 in quarter 1 and $425,000 in quarter 2.

Reference no: EM13580021

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