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Problem

Myagi Farm Supply Company manufactures and sells a fertilizer called Basic II. The following data are available for preparing budgets for Basic II for the first 2 quarters of 2012. 1. Sales: Quarter 1, 40,000 bags; quarter 2, 50,000 bags. Selling price is $65 per bag. 2. Direct materials: Each bag of Basic II requires 6 pounds of Crup at a cost of $4 per pound and 10 pounds of Dert at $1.50 per pound. 3. Desired inventory levels: 4. Direct labor: Direct labor time is 15 minutes per bag at an hourly rate of $10 per hour. 5. Selling and administrative expenses are expected to be 10% of sales plus $160,000 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 100% of direct labor cost. (2) The direct materials budget for Dert which shows the cost of Dert to be $682,500 in quarter 1 and $ 82,500 in quarter 2.

Instructions

Prepare the budgeted income statement for the first 6 months of 2012 and all required supporting budgets by quarters. Do not prepare the manufacturing overhead budget or the direct materials budget for Dert.

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M92772126

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