Zelmer Farm Supply Company manufactures and sells a pesticide called Snare. The following data are available for

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Zelmer 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 2012.

1. Sales: Quarter 1, 28,000 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 $4 per pound and 6 pounds of Tarr at $1.50 per pound.

3. Desired inventory levels:


Zelmer Farm Supply Company manufactures and sells a pesticide ca


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 $175,000 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 $297,000 in quarter 1 and $439,500 in quarter 2.

Instructions
Prepare the budgeted income statement for the first 6 months and all required operating budgets by quarters. Do not prepare the manufacturing overhead budget or the direct materials budget forTarr.

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Managerial Accounting Tools for business decision making

ISBN: 978-0470477144

5th edition

Authors: Jerry J. Weygandt, Paul D. Kimmel, Donald E. Kieso

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