Question

PA8-6 Preparing Operating Budgets for a Merchandising Firm [LO 8-5, 8-3a, f, g, h] Red Canyon T-shirt Company operates a chain of T-shirt shops in the southwestern United States. The sales manager has provided a sales forecast for the coming year, along with the following information: Budgeted Unit Sales Quarter 1 43,000 Quarter 2 66,000 Quarter 3 33,000 Quarter 4 66,000 • Each T-shirt is expected to sell for $18. • The purchasing manager buys the T-shirts for $7 each. • The company needs to have enough T-shirts on hand at the end of each quarter to fill 28 percent of the next quarter's sales demand. • Selling and administrative expenses are budgeted at $86,000 per quarter plus 15 percent of total sales revenue. Required: 1. Determine budgeted sales revenue for each quarter. Quarter 1 Quarter 2 Quarter 3 Budgeted Sales Revenue 2. Determine budgeted cost of merchandise purchased for each quarter. Quarter 1 Quarter 2 Quarter 3 Budgeted Cost of Merchandise Purchased 3. Determine budgeted cost of good sold for each quarter. Quarter 1 Quarter 2 Quarter 3 Budgeted Cost of Goods Sold

Answer 1

Budgeted sales Revenue Q, $774000 (43000 418) Qe 1188000 (66000 XIe) Q. Qy 594000 1188000 (33000X18) (66000x18)

Q2 Q3 Qu. (units) 33000 66000 • Budgeted cost Q1 of purchases sales 43000 Add? closing stock 18480 (281. of Next month sale) les opening stock. 66000 9200 Isuso (q2u0) (18480) (18480) 56760 x 42240 47520 61480 Purchases Purchase price @7 cost $.430360 397320 295680 332640

Q2 Qi Q3 Qu Budgeted cost of goods sold 231000 462000 Sales & purchases Port Price 301000 (43000x7) tice 462000 (660004+) (33000x+). (6600047) on oborin for VOU