Cook 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 2022.

1. Sales: quarter 1, 40,000 bags; quarter 2, 56,000 bags. Selling price is $60 per bag.
2. Direct materials: each bag of Snare requires 4 pounds of Gumm at a cost of $3.80 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)	8,000	15,000	18,000
Gumm (pounds)	9,000	10,000	13,000
Tarr (pounds)	14,000	20,000	25,000

4. Direct labor: direct labor time is 15 minutes per bag at an hourly rate of $16 per hour.
5. Selling and administrative expenses are expected to be 15% of sales plus $175,000 per quarter.
6. Interest expense is $100,000 for the 2 quarters.
7. Income taxes are expected to be 20% of income before income taxes.

Your assistant has prepared two budgets: (1) the manufacturing overhead budget shows expected costs to be 125% of direct labor cost, and (2) the direct materials budget for Tarr shows the cost of Tarr purchases to be $297,000 in quarter 1 and $439,500 in quarter 2.

Instructions

Net income $1,007,040 Cost per bag $33.20

Prepare the budgeted multiple-step income statement for the first 6 months and all required operating 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.

Prepare sales, production, direct materials, direct labor, and income statement budgets.