P22- A Prepare budgeted income statement and supporting budgets. 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 2020. Sales: quarter 1, 40,000 bags; quarter 2, 56,000 bags. Selling price is $60 per bag. - 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. . Desired inventory levels: Type of Inventory Snare (bags) Gumm (pounds) Tarr (pounds) January 1 8,000 9,000 14,000 April 1 15,000 10,000 20,000 July 1 18,000 13,000 25,000 .. Direct labor: direct labor time is 15 minutes per bag at an hourly rate of $16 per hour. . Selling and administrative expenses are expected to be 15% of sales plus $175,000 per quarter. . Interest Expense is $100,000. Income taxes are expected to be 30% 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. nstructions Prepare the budgeted multi-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 repare the manufacturing overhead budget or the direct materials budget for Tarr. HOTE: Enter a number in cells requesting a value; enter either a number or a formula in cells with a "?". COOK FARM SUPPLY COMPANY Budgeted Income Statement For the Six Months Ending June 30, 2020 Sales revenue ? Cost of goods sold 7 Gross Profit ? Selling and administrative expenses Value Income from operations Interest expense Value Income before income tax Income tax expense (30%) Net income ? Cost per Bag Quantity Unit Cost Total Cost Element Direct Materials Gumm Tarr Direct Labor Manufacturing overhead (125% of direct labor cost) Total 4 pounds 6 pounds 1/4 hour Value Value Value After you have completed P22-1A consider the following additional question. 1. Assume that the expected unit sales in Quarter 1 changed to 36,000 bags of Snare. Also assume that the amount of direct material (Gumm) used changed to 5 pounds per bag; and, that the direct labor rate changed to $18 per hour. Revise the budgets and budgeted income statement to reflect these changes. P22- A Prepare budgeted income statement and supporting budgets. 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 2020. Sales: quarter 1, 40,000 bags; quarter 2, 56,000 bags. Selling price is $60 per bag. - 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. . Desired inventory levels: Type of Inventory Snare (bags) Gumm (pounds) Tarr (pounds) January 1 8,000 9,000 14,000 April 1 15,000 10,000 20,000 July 1 18,000 13,000 25,000 .. Direct labor: direct labor time is 15 minutes per bag at an hourly rate of $16 per hour. . Selling and administrative expenses are expected to be 15% of sales plus $175,000 per quarter. . Interest Expense is $100,000. Income taxes are expected to be 30% 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. nstructions Prepare the budgeted multi-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 repare the manufacturing overhead budget or the direct materials budget for Tarr. HOTE: Enter a number in cells requesting a value; enter either a number or a formula in cells with a "?". COOK FARM SUPPLY COMPANY Budgeted Income Statement For the Six Months Ending June 30, 2020 Sales revenue ? Cost of goods sold 7 Gross Profit ? Selling and administrative expenses Value Income from operations Interest expense Value Income before income tax Income tax expense (30%) Net income ? Cost per Bag Quantity Unit Cost Total Cost Element Direct Materials Gumm Tarr Direct Labor Manufacturing overhead (125% of direct labor cost) Total 4 pounds 6 pounds 1/4 hour Value Value Value After you have completed P22-1A consider the following additional question. 1. Assume that the expected unit sales in Quarter 1 changed to 36,000 bags of Snare. Also assume that the amount of direct material (Gumm) used changed to 5 pounds per bag; and, that the direct labor rate changed to $18 per hour. Revise the budgets and budgeted income statement to reflect these changes