Glendo 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 2014.
| 1. |
|
Sales: Quarter 1, 29,500 bags; quarter 2, 43,600 bags. Selling price is $61 per bag. |
| 2. |
|
Direct materials: Each bag of Snare requires 5 pounds of Gumm at a cost of $4 per pound and 8 pounds of Tarr at $1.50 per pound. |
| 3. |
|
Desired inventory levels: |
|
Type of Inventory
|
|
January 1
|
|
April 1
|
|
July 1
|
| Snare (bags) |
|
8,300 |
|
12,300 |
|
18,100 |
| Gumm (pounds) |
|
9,400 |
|
10,400 |
|
13,400 |
| Tarr (pounds) |
|
14,400 |
|
20,500 |
|
25,300 |
| 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 $179,000 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 $302,000 in quarter 1 and $424,000 in quarter 2.
Prepare the sales budget and the production budget