Myagi Farm Supply Company manufactures and sells a fertilizer called Basic II. The following data are available for preparing budgets for Basic II for the first 2 quarters of 2012.1. Sales: Quarter 1, 40,000 bags; quarter 2, 50,000 bags. Selling price is $65 per bag.2. Direct materials: Each bag of Basic II requires 6 pounds of Crup at a cost of $4 per pound and 10 pounds of Dert at $1.50 per pound.3. Desired inventory levels:

4. Direct labor: Direct labor time is 15 minutes per bag at an hourly rate of $10 per hour.5. Selling and administrative expenses are expected to be 10% of sales plus $160,000 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 shows expected costs to be 100% of direct labor cost. (2) The direct materials budget for Dert which shows the cost of Dert to be $682,500 in quarter 1 and $ 82,500 in quarter 2.InstructionsPrepare the budgeted income statement for the first 6 months of 2012 and all required supporting budgets by quarters. Do not prepare the manufacturing overhead budget or the direct materials budget for Dert.

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January 1 10,000 9,000 15,000 July 1 20,000 15,000 25,000 Type of Inventory Basic II (bags) Crup (pounds) Dert (pounds) April 1 15,000 20,000