Pharoah 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. 1. Sales: quarter 1, 29,400 bags; quarter 2,42,600 bags. Selling price is $63 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 $1.75 per pound. 3. Desired inventory levels: Type of Inventory January 1 April 1 July 1 Snare (bags) 8,100 12,200 18,100 Gumm (pounds) 9,500 14,200 10,100 20,500 13,200 25,400 Tarr (pounds) 4. Direct labor: direct labor time is 15 minutes per bag at an hourly rate of $16 per hour. 5. Selling and administrative expenses are expected to be 15% of sales plus $179,000 per quarter. 6. Interest expense is $100,000. 7. 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 $301,000 in quarter 1 and $426,500 in quarter 2. (Note: Do not prepare the manufacturing overhead budget or the direct materials budget for Tarr.) PHAROAH FARM SUPPLY COMPANY Sales Budget For the Six Months Ending June 30, 2020 Quarter Six Months Expected unit sales 29,400 42,600 72,000 Unit selling price 63 63 A LA A Total sales 1,852,200 $ 2,683,800 $ 4,536,000 Prepare the production budget. PHAROAH FARM SUPPLY COMPANY Production Budget For the Six Months Ending June 30, 2020 Quarter Expected Unit Sales Expected Unit Sales 29400 42600 Add Desired Ending Finished Goods Units 12200 18100 Total Required Units otal Required Units 41600 60700 Less : Beginning Finished Goods Units 8100 12200 Required Production Units 33500 - 48500 Your answer is correct. Prepare the direct materials budget. (Round Cost per pound answers to 2 decimal places, e.g. 52.70.) PHAROAH FARM SUPPLY COMPANY Direct Materials Budget-Gumm For the Six Months Ending June 30, 2020 Quarter Units to be produced 33500 48500 Direct Materials per Unit 4. Total Pounds Needed for Production A 134,000 194,000 Add Desired Ending Direct Materials (Pounds) 10,100 13,200 Total Materials Required 144,100 207,200 Less 4: Beginning Direct Materials (Pounds) 9500 i 1 0,100 i Direct Materials Purchases 134,600 197,100 Cost per Pound 3.80 $ 3.80 Total Cost of Direct Materials Purchases 4 511,480 748,980 PHAROAH FARM SUPPLY COMPANY Direct Labor Budget For the Six Months Ending June 30, 2020 - Quarter Units to be Produced 33500 48500 Direct Labor Time (Hours) per Unit 0.25 0.25 Total Required Direct Labor Hours 12125 Required Direct Labor Hours Direct Labor Cost per Hour 8375 16 $ $ 16 - 16 Total Direct Labor Cost 134,000 194,000 $ PHAROAH FARM SUPPLY COMPANY Selling and Administrative Expense Budget For the Six Months Ending June 30, 2020 - Quarter Six Months Budgeted sales in units 29,400 42,600 72,000 179,000 % 179,000 358,000 Variable Cost Fixed Cost Variable Cost Total $ [ $ 277,830 402,670 680,400 277,830 46000 $ Total 456,830 589570 $ 581,570 $ 1,038,400 - Your answer is partially correct. Prepare the budgeted multiple-step income statement for the first 6 months. (Round intermediate calculations to 2 decimal places and final answer to 0 decimal places, e.g. 1,255.) PHAROAH FARM SUPPLY COMPANY Budgeted Income Statement For the Six Months Ending June 30, 2020 Sales 4 $ 4,536,000 Cost of Goods Sold 2,498,400 i Gross Profit 2,037,600 Selling and Administrative Expenses 1,038,400 i Income from Operations 999,200 i Interest Expense 100,000 i Income Before Income Tax 999,200 Income Tax Expense 299,760 Net Income /(Loss) 699,440