Natural Essence produces and sells new type of hair shampoo.

The company expects to sells 40,000, 50,000, 70,000, and 50,000 bottles of shampoo in the 1^st, 2^nd, 3^rd, and 4^th quarters, respectively.

The shampoo requires 6 ounces of Chemical A and 11 ounces of Chemical B.

Ending inventory of finished goods is be 20% of next quarter's sales. The desired ending inventory for material is 10% of next quarter's production requirements.

There are 8,000 bottles of shampoo, 20,000 ounces of Chemical A, and 50,000 ounces of Chemical B at the beginning of the first quarter.

At the end of the fourth quarter, the company must have 15,000 bottles of soap, 20,000 ounces of Chemical A, and 80,000 ounces of Chemical B to meet its needs in the first quarter of 2017.

The cost of Chemical A is $0.10 per ounce, the cost of Chemical B is $0.06 per ounce, and the selling price of the shampoo is $11.25 per bottle.

The cost of direct labor is $0.75 per bottle, and the cost of variable overhead is $1.25 per bottle.

Variable selling and administrative expense is 5% of sales, and fixed selling and administrative expenses are $55,000 per quarter.

Fixed manufacturing overhead is $45,000 per quarter.

Prepare a budgeted income statement using the variable costing format for the 3rd quarter of 2016. (Ignore income taxes).