Case Study 2
ACCT2031 Case Study 2
Caprie Pets Food Company manufactures and sells dog food called Caprie Supreme. The following data are available for preparing budgets for Caprie Supreme for the first 2 quarters of 2019.
- Sales: quarter 1 – 40,000 bags; quarter 2 – 50,000 bags. Selling price is $63 per bag.
- Direct materials: each bag of Caprie Supreme requires 5 pounds of protein at a cost of $3.80 per pound and 10 pounds of carbohydrates at $1.50 per pound.
- Desired inventory levels:
| Type of Inventory | January 1 | April 1 | July 1 |
| Bags | 10,000 | 15,000 | 20,000 |
| Protein (pounds) | 9,000 | 12,000 | 15,000 |
| Carbohydrates (pounds) | 15,000 | 20,000 | 25,000 |
- Direct labour: direct labour time is 15 minutes per bag at an hourly rate of $12 per hour.
- Interest expense is $70,000.
- Income taxes are expected to be 30% of income before income taxes.
The direct labour budget shows expected costs to be $135,000 in quarter 1 and 165,000 in quarter 2. The selling and administrative expenses budget shows expected costs to be $402,000 in quarter 1 and $465,000 in quarter 2. The manufacturing overhead budget shows expected costs to be 100% of direct labour cost. The direct materials budget for carbohydrates shows the cost of carbohydrates to be $682,500 in quarter 1 and $832,500 in quarter 2.
Instructions:
- Prepare the sales budget for the first 6 months of 2019 by quarters.
- Prepare the production budget for the first 6 months of 2019 by quarters.
- Prepare the direct materials budget for the first 6 months of 2019 by quarters.
- Prepare the budgeted income statement for the first 6 months of 2019.
~End of Assignment 2~
