Reference no: EM132993697

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 2020.

1 .Sales: quarter 1, 28,600 bags; quarter 2, 43,400 bags. Selling price is $62 per bag.

2. Direct materials: each bag of Snare requires 5 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:

Type of Inventory                         January 1              April 1               July 1
Snare (bags)                               8,400               12,300             18,300
Gumm (pounds)                           9,400                10,500             13,500
Tarr (pounds)                             14,300                  20,400           25,100

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 $178,000 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 $299,000 in quarter 1 and $426,500 in quarter 2.

(Note: Do not prepare the manufacturing overhead budget or the direct materials budget for Tarr.)

Problem 1: Prepare the Multistep Income Statement Please also include calculations on how you got the numbers for each line on the multistep income statement