Question

Problem 22-05A (Part Level Submission) The budget committee of Suppar Company collects the following data for its San Miguel Store in preparing budgeted income statements for May and June 2020. 1. Sales for May are expected to be $800,000. Sales in June and July are expected to be 5% higher than the preceding month. 2. Cost of goods sold is expected to be 75% of sales. 3. Company policy is to maintain ending merchandise inventory at 10% of the following month's cost of goods sold. 4. Operating expenses are estimated to be as follows: Sales salaries Advertising Delivery expense Sales commissions Rent expense Depreciation Utilities Insurance $35,000 6 % 2% 5% $5,000 $800 $600 $500 per month of monthly sales of monthly sales of monthly sales per month per month per month per month 5. Interest expense is $2,000 per month. Income taxes are estimated to be 30% of income before income taxes. (a) Your answer is correct. Prepare the merchandise purchases budget for each month in columnar form. SUPPAR COMPANY

Answer 1

Budgeted income statement
			may	June
sales			800000	840000
cost of goods sold @75% of sale			600000	630000
Gross profit			200000	210000
Operating expenses:
sales salaries			35000	35000
advertising			48000	50400
delivery expenses			16000	16800
sales commission			40000	42000
rent expenses			5000	5000
depreciation			800	800
utilities			600	600
insurance			500	500
Total operating expenses			145900	151100
Operating income			54100	58900
Other income expenses
Interest expenses			2000	2000
net income before tax			52100	56900
tax @ 30%			15630	17070
net income			36470	39830

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