Glendo farm supply company manufactures and sells a

Reference no: EM13581439

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 2013.

1.		Sales: Quarter 1, 29,800 bags; quarter 2, 43,400 bags. Selling price is $62 per bag.
2.		Direct materials: Each bag of Snare requires 5 pounds of Gumm at a cost of $4 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)	8,200	12,300	18,200
Gumm (pounds)	9,400	10,200	13,200
Tarr (pounds)	14,400	20,300	25,400

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 $299,000 in quarter 1 and $427,000 in quarter 2.

Reference no: EM13581439

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