P23-1B Mercer Farm Supply Company manufactures and sells a fertilizer called Basic I. The following data are available for preparing budgets for Basic Il for the first 2 quarters of 2017 1. Sales: quarter 1, 40,000 bags, quarter 2, 50,000 bags. Selling price is $63 per bag. 2. Direct materials: each bag of Basic II requires 5 pounds of Crup at a cost of $3.80 per pound and 10 pounds of Dert at $1.50 per pound. 3. Desired inventory levels: Type of Inventory Basic II (bags) Crup (pounds) Dert (pounds) January 1 April 1 July 1 10,000 9,000 15,000 15,000 12,000 20,000 20,000 15,000 25,000 4. Direct labor direct labor time is 15 minutes per bag at an hourly rate of $12 per hour 5. Selling and admin expenses are expected to be 10% of sales plus $150,000 per quarter. 6 Interest expense is $70,000. 7. Income taxes are expected to be 30 % of income before income taxes. Your assistant has prepared two budgets: (1) The mtg overhead budget shows.expected costs to be 100% of direct labor cost. (2) The direct materials budget for Dert which shows the cost $682,500 in quarter 1 and $832,500 in quarter 2 Instructions Prepare the budgeted multiple-step income statement for the first 6 months of 2017 and all required supporting 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 Dert Mercer Farm Supply Company Sales Budget For the Six Months Ending June 30, 2017 1 Qtr 2nd Qtr Six Months Expected unit sales Unit selling price x 63 x 63 X 63 Total Sales Mercer Farm Supply Comparny Production Budget For the Six Months Ending June 30, 2017 1 Qtr 2nd Qtr Six Months Expected unit sales 40,000 50,000 Add: End Finished Goods (units) Total required units Less: Beg Finished Goods (units) Required Production Units Mercer Farm Supply Company Direct Materials Budget Crup For the Six Months Ending June 30, 2017 1e Qtr 2d Qtr Six Months Units to be produced Direct materials per unit 5 X Total Pounds Needed for Production Direct Materials Purchases Cost Per Pound 3.80 X 3.80 Total Cost of Dir Mat'l Purchases