50.1K

Verified Solution

Link Copied!

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, 27,400 bags; quarter 2, 42,300 bags. Selling price is $59 per bag.
2.		Direct materials: each bag of Snare requires 5 pounds of Gumm at a cost of $4.00 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)		7,600			12,900			17,100
Gumm (pounds)		9,000			11,100			12,500
Tarr (pounds)		13,500			19,200			25,500

4.		Direct labor: direct labor time is 15 minutes per bag at an hourly rate of $16.00 per hour.
5.		Selling and administrative expenses are expected to be 10% of sales plus $166,170 per quarter.
6.		Income taxes are expected to be 40% 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 $299,400 in quarter 1 and $436,900 in quarter 2.

Compute the cost per bag. (Round Unit cost to 2 decimal places, e.g. $25.28.)

Cost Per Bag

$________

Answer & Explanation Solved by verified expert

See Answer