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Posted by: Christian
Price Quoted by Student: $10
Posted On: 2011-10-17 12:12:04

P7-1A Danner 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 2009.


Sales: Quarter 1, 28,000 bags; quarter 2, 42,000 bags. Selling price is $60 per bag.

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.


Desired inventory levels:


Type of Inventory

January 1

April 1

July 1

Snare (bags)




Gumm (pounds)




Tarr (pounds)




Direct labor: Direct labor time is 15 minutes per bag at an hourly rate of $14 per hour.

Selling and administrative expenses are expected to be 15% of sales plus $175,000 per quarter.

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 $421,500 in quarter 2.


Prepare the budgeted income statement for the first 6 months and all required supporting budgets by quarters. (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.

P7-1A Danner Farm Supply Company manufactures and
Price $10
Attachment 1: P7-1A Danner Farm Supply Company.doc
Solution Posted By: Christian    Posted on: 17-10-2011