PROBLEMS: SETA P9-1A 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 2017. Prepare budgeted income statement and supporting budgets. (LO 2, 3), AP 1. Sales: quarter 1, 40,000 bags; quarter 2, 56,000 bags. Selling price is $60 per bag. 2. 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 3. Desired inventory levels: XLS April I 15,000 10,000 20,000 Type of Inventory Snare (bags) Gumm (pounds) Tarr (pounds) January! 8,000 9,000 14,000 July 1 18,000 13,000 25,000 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 si 75,000 per quarter 6. Interest expense is $100,000. Income taxes are expected to be 30% of income before income taxes. 02 9 Budgetary Planning 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. Instructions Prepare the budgeted multiple-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 prepare the manufacturing overhead budget or the direct materials budget for Tarr Net income $881,160 Cost per bag $33.20