Niva A. Beauty Company manufactures and sells a makeup blusher called Laura Blush. The following data are available for preparing budgets for Laura Blush for the first 2 quarters of 2020.

1-Sales in quarter 1 is 50,000 blushers; and in quarter 2 is 66,000 blushers. Selling price is $70 per blush

2-Direct Materials: each blusher of Laura requires 5 pounds of powder at a cost of $3.50 per pound and 3 pounds of glitter at $2 per pound.

3-Desired inventory:

Type of Inventory

January 1

April 1

July 1

Laura Blushers

9,000

16,000

19,000

Powders ( Pounds)

10,000

11,000

14,000

Glitter (Pounds)

15,000

21,000

25,000

4-Direct labor: Direct labor times is 25 minutes per blush at an hourly rate of $ 15 per hour.

5-Selling and administrative expenses are expected to be 10% of sales plus $170,000 per quarter.

6-Interest Expense is $150,000

7-Income tax are expected to be 30% of income before income taxes.

8-Niva has issued 5,000,000 shares closing at 5$ per share.

9-Niva average total assets 15,000,000$

10-Two budgets are already prepared

• The manufacturing overhead budget shows expected cost to be 125% of direct labor cost.
• The direct materials budget of Glitter shows the cost of glitter purchases to be $297,000 in quarter 1 and $439,500 in quarter 2.

Instructions:

1.Prepare the following operating budgets by quarters to be able to prepare the multiple-step income statement for the first 6 months:

a-Sales Budget

b-Production Budget

c-Direct Material Budget forPowderonly

d-Direct Labor

e-Selling and Administrative Expense Budget

f-Multiple-step income statement for the first 6 months. (Do not do the quarterly budget)

2.Calculate the company's return on assets and price-earnings ratio.