Crane 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 2022. 1. Sales: quarter 1, 28,000 bags; quarter 2, 43,400 bags. Selling price is $63 per bag. Direct materials: each bag of Snare requires 4 pounds of Gumm at a cost of $4 per pound and 6 pounds of 2. Tarr at $1.50 per pound. 3. Desired inventory levels: Type of Inventory January 1 April 1 July 1 Snare (bags) 8,400 12,500 18,400 Gumm (pounds) 9,500 10,300 13,400 Tarr (pounds) 14,500 20,100 25,100 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 20% 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 $300,000 in quarter 1 and $424,500 in quarter 2. (Note: Do not prepare the manufacturing overhead budget or the direct materials budget for Tarr.)

Crane 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 2022. 1. Sales: quarter 1, 28,000 bags; quarter 2, 43,400 bags. Selling price is $63 per bag. Direct materials: each bag of Snare requires 4 pounds of Gumm at a cost of $4 per pound and 6 pounds of 2. Tarr at $1.50 per pound. 3. Desired inventory levels: Type of Inventory January 1 April 1 July 1 Snare (bags) 8,400 12,500 18,400 Gumm (pounds) 9,500 10,300 13,400 Tarr (pounds) 14,500 20,100 25,100 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 20% 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 $300,000 in quarter 1 and $424,500 in quarter 2. (Note: Do not prepare the manufacturing overhead budget or the direct materials budget for Tarr.)

Cornerstones of Financial Accounting

4th Edition

ISBN:9781337690881

Author:Jay Rich, Jeff Jones

Publisher:Jay Rich, Jeff Jones

Chapter12: Fainancial Statement Analysis

Section: Chapter Questions

Problem 11MCQ

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