Homework SourseONLY NEED HELP WITH After you have completed P91A consider t
ONLY NEED HELP WITH:
After you have completed P9-1A consider the following additional question. 1. Assume that the expected unit sales in Quarter 1 changed to 36,000 bags of Snare. Also assume that the amount of direct material (Gumm) used changed to 5 pounds per bag; and, that the direct labor rate changed to $18 per hour. Revise the budgets and budgeted income statement to reflect these changes.
| P9-1A Prepare budgeted income statement and supporting budgets. | ||||||
| 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, 40,000 bags; quarter 2, 56,000 bags. Selling price is $60 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) | 8,000 | 15,000 | 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 $16 per hour. | ||||||
| 5. Selling and administrative expenses are expected to be 15% of sales plus $175,000 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 $297,000 in quarter 1 and $439,500 in quarter 2. | ||||||
| Instructions | ||||||
| Prepare the budgeted multi-step income statement for the first 6 months and all required operating budgets by | ||||||
| quarters. (Note: Use variable and fixed in the selling and administrative expense budget.) Do not | ||||||
| prepare the manufacturing overhead budget or the direct materials budget for Tarr. | ||||||
| NOTE: Enter a number in cells requesting a value; enter either a number or a formula in cells with a \"?\" . | ||||||
Solution
Workings:
| Cook Farm Supply Company | |||
| Budgeted Income statement for the six months ending June 30, 2017 | |||
| Details | Quarter1 | Quarter2 | Total |
| Sales Revenue | 2160000 | 3360000 | 5520000 |
| Cost of goods sold | 1372500 | 2135000 | 3507500 |
| Gross margin | 787500 | 1225000 | 2012500 |
| Selling and administrative expenses: | |||
| Variable selling and administrative expenses | 324000 | 504000 | 828000 |
| Fixed selling and administrative expenses | 175000 | 175000 | 350000 |
| Total Selling and administrative expenses | 499000 | 679000 | 1178000 |
| Net operating income | 288500 | 546000 | 834500 |
| Interest expense | 100000 | 100000 | 200000 |
| Net income before income tax | 188500 | 446000 | 634500 |
| Income tax (@ 30%) | 56550 | 133800 | 190350 |
| Net income | 131950 | 312200 | 444150 |
