Myagi Farm Supply Company manufactures and sells a fertilizer called Basic II$.$ The following data are available for preparing budgets for Basic II for the first two quarters of $2017.$

$1.$ Expected Sales: Quarter $1,40,000$ bags; Quarter $2,50,000$ bags. Selling price per bag is $$65.$

$2.$ Direct Materials Expectations: Each bag of Basic II requires $6$ pounds of Crup at an expected cost of $$4$ per pound and $10$ pounds of Dert at an expected cost of $$1\mathrm{.}50$ per pound.

$3.$ Desired Inventory Levels:

Type of Inventory January $1$ April $1$ July $1$

Basic II $($bags$)10,00015,00020,000$

Crup $($pounds$)9,00012,00015,000$

Dert $($pounds$)15,00020,00025,000$

$4.$ Direct Labor Expectations: Direct Labor time is $15$ minutes per bag at an expected hourly rate of $$10$ per hour.

$5.$ Selling and Administrative Expenses are expected to be $10\%$ of Sales plus $$160,000$ per quarter.

$6.$ Income Taxes are expected to be $30\%$ of Income from Operations.

$7.$ Variable Manufacturing Overhead is expected to be $60\%$ of Direct Labor Costs, while Fixed Manufacturing Overhead is expected to be $$50,000$ per quarter.

Your assistant has prepared $2$ budgets: $(1)$ the manufacturing overhead budget shows expected costs to be $100\%$ of direct labor cost. $(2)$ The direct materials purchases budget for Dert which shows the cost of Dert to be $$682,500$ in Quarter $1$ and $$825,000$ in Quarter $2.$

Instructions.

Prepare the budgeted income statement for the first six months of $2017$ and all required supporting budgets by quarter. $($Note: Use fixed and variable costs in the selling and administrative expense budget and in the manufacturing overhead budget.$)$ Do not prepare the direct materials purchases budget for Dert.