Tilger Farm Supply Company manufactures and sells a fertilizer called Snare. The following data are available for preparing budgets for Snare for the first two quarters of 2022.

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

2. Direct materials: Each bag of Snare requires 4 kg of Gumm at $4 per kilogram and 6 kg of Tarr at $1.50 per kilogram. 

3. Desired inventory levels:

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

5. The company expects selling and administrative expenses to be 15% of sales plus $175,000 per quarter. 

6. It expects income taxes to be 30% of income from operations.

Your assistant has prepared two budgets:

(1) the manufacturing overhead budget, which shows expected costs to be 150% of direct labour cost;

(2) the direct materials budget for Tarr, which shows the cost of Tarr purchases to be $297,000 in quarter 1 and $439,500 in quarter 2.

Instructions 

Prepare the budgeted income statement for the first six months and all required operating budgets by quarters. Do not prepare the manufacturing overhead budget or the direct materials budget for Tarr.

Transcribed Image Text:

Type of Inventory Snare (bags) Gumm (kg) Tarr (kg) January 1 8,000 9,000 14,000 April 1 12,000 10,000 20,000 July 1 18,000 13,000 25,000