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 2011. 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) 8,000 12,000 18,000 Gumm (pounds) 9,000 10,000 13,000 Tarr (pounds) 14,000 20,000 25,000 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. Instructions Complete 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). DANNER FARM SUPPLY COMPANY Sales Budget For the Six Months Ending June 30, 2011 Quarter Six 1 2 Months Expected unit sales Unit selling price $ $ $ Total sales $ $ $ DANNER FARM SUPPLY COMPANY Production Budget For the Six Months Ending June 30, 2011 Quarter Six 1 2 Months Expected unit salesDesired ending finished goods unitsBeginning finished goods units Add: Desired ending finished goods unitsExpected unit salesBeginning finished goods units Total required units Less: Beginning finished goods unitsExpected unit salesDesired ending finished goods units Required production units DANNER FARM SUPPLY COMPANY Direct Materials Budget-Gumm For the Six Months Ending June 30, 2011 Quarter Six 1 2 Months Desired ending direct materialsBeginning direct materialsCost per poundUnits to be producedDirect materials per unit Direct materials per unitDesired ending direct materialsBeginning direct materialsCost per poundUnits to be produced Total pounds needed for production Add: Cost per poundDirect materials per unitBeginning direct materialsDesired ending direct materialsUnits to be produced Total materials required Less: Cost per poundDesired ending direct materialsBeginning direct materialsUnits to be producedDirect materials per unit Direct materials purchases Units to be producedDesired ending direct materialsDirect materials per unitCost per poundBeginning direct materials $ $ Total cost of direct materials purchases $ $ $ DANNER FARM SUPPLY COMPANY Direct Labor Budget For the Six Months Ending June 30, 2011 Quarter Six 1 2 Months Units to be produced Direct labor time (hours) per unit 1/4 1/4 Total required direct labor hours Direct labor cost per hour $ $ Total direct labor cost $ $ $ DANNER FARM SUPPLY COMPANY Selling and Administrative Expense Budget For the Six Months Ending June 30, 2011 Quarter Six 1 2 Months Budgeted sales in units Variable $ $ $ Fixed Total $ $ $ DANNER FARM SUPPLY COMPANY Budgeted Income Statement For the Six Months Ending June 30, 2011 Income tax expenseSalesSelling and administrative expensesCost of goods sold $ Selling and administrative expensesSalesIncome tax expenseCost of goods sold Gross profit SalesCost of goods soldIncome tax expenseSelling and administrative expenses Income from operations Cost of goods soldSelling and administrative expensesIncome tax expenseSales Net income $