Prepare the sales budget and prepare the production budget

Assignment Help Accounting Basics

Reference no: EM133503405

Case: Pharoah 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 2025.

1. Sales: quarter 1. 28,600 bags; quarter 2. 42.600 bags. Selling price is $62 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:

Type of Inventory	January 1	April 1	July 1

Snare (bags)	8,100	12,400	18,500
Gumm (pounds)	9,100	10,300	13.200
Tarr (pounds)	14,300	20.300	25,500

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 for the 2 quarters.

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 $299,000 in quarter 1 and $425,500 in quarter 2.

Question 1: Prepare the sales budget.

Question 2: Prepare the production budget.

Reference no: EM133503405

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