Wahlen Farm Supply Company manufactures and sells a pesticide called Basic II. The following data are available for preparing budgets for Basic II for the first two quarters of 2020.

1. Sales: Quarter 1 60,000 bags , Quarter 2 40,000 bags, Selling price per bag $60 per bag.

2. Direct materials: Each bag of Basic II requires 6 kilograms of Crup at a cost of $4.00 per kilogram and 10 kilograms of Dert at $1.50 per kilogram.

3. Desired inventory levels:

Type of Inventory January 1 April 1 July 1

Basic II (bags) 10,000 15,000 20,000

Crup (kilograms) 9,000 12,000 15,000

Dert (kilograms) 15,000 20,000 25,000

4. Direct labour: Direct labour time is 15 minutes per bag at an hourly rate of $12.00 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 the income from operations.

Your assistant has prepared two budgets: (1) The manufacturing overhead budget which shows expected costs to be 100% of the direct labor costs. (2) The direct materials budget for Dert, whichshows the cost of Dert purchases to be $683,500 in quarter 1 and $982,500 in quarter 2.

Prepare the budgeted income statement for the first six months of 2020 and all required operating budgets by quarters. (Note: Categorize variable and fixed items in the selling and administrative expenses budget.)Do not prepare the manufacturing overhead budget or the direct materials budget for Dert.