Project two: master budget | Accounting homework help

 Project Two: Master Budget 

 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 2020.

1.Sales: quarter 1, 28,200 bags; quarter 2, 43,400 bags. Selling price is $63 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 InventoryJanuary 1April 1July 1Snare (bags)8,10012,50018,300Gumm (pounds)9,10010,20013,100Tarr (pounds)14,20020,50025,500

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 $177,000 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 $303,000 in quarter 1 and $423,500 in quarter 2.

(Note: Do not prepare the manufacturing overhead budget or the direct materials budget for Tarr.)