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:
Type of inventory January 1 April1 July1
Snare(bags) 8,000 12,000 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 $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 $297,000 in quarter 1 and $43,500 in quarter 2.
Prepare a budgeted income statement for the first 6 months and all required operating budgets by quarter.(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.
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