This Website Has Been Moved to a New Link


P9-1A Glendo Farm Supply Company

Price: $2.50

P9-1A 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, 30,000 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 $3.80 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 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

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 $297,000 in quarter 1 and $439,500 in
quarter 2.

Prepare the budgeted 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.

No comments:

Post a Comment