(SO 2, 3) Prepare a budgeted income statement and supporting budgets. P10-45B Wahlen Farm Supply Company manufactures and sells a pesticide called Basic II. The following data are avail able for preparing budgets for Basic II for the first two quarters of 2016 1. Sales: Quarter 1, 40,000 bags; quarter 2, 60,000 bags. Selling price is S60 per bag. 2. Direct materials: Each bag of Basic II requires 6 kg of Crup at $4 per kilogram and 10 kg of Dert at $1.50 per kilogram. 3. Desired inventory levels Type of Inventory anuary July1 10,000 9,000 15,000 Basic II (bags) Crup (kilograms) Dert (kilograms) 15,000 12,000 20,000 20,000 15,000 25,000 4. Direct labour: Direct labour time is 15 minutes per bag at an hourly rate of $12 per hour. 5. Selling and administrative expenses are expected to be 10% of sales plus $150,000 per quarter. 6 Income taxes are expected to be 30% of income from operations. Your assistant has prepared two budgets: (1) The manufacturing overhead budget, which shows expected costs to be 100% of direct labour costs. (2) The direct materials budget for Dert, which shows the cost of Dert purchases to be $682,500 in quarter 1 and S982,500 in quarter 2. Instructions Prepare the budgeted income statement for the first six months of 2016 and all required operating budgets by quarters. (Note: Categorize variable and fixed items in the selling and administrative expenses budget.) Do not prepare the manufac- turing overhead budget or the direct materials budget for Dert. Cost per bag: $45