Question

Citrus Girl Company (CGC) purchases quality citrus produce from local growers and sells the produce via the Internet across the United States. To keep costs down, CGC maintains a warehouse, but no showroom or retail sales outlets. CGC has the following information for the second quarter of the year: 1. Expected monthly sales for April, May, June, and July are $240,000, $210,000, $330,000, and $110,000, respectively. 2. Cost of goods sold is 40 percent of expected sales. 3. CGC's desired ending inventory is 30 percent of the following month's cost of goods sold. 4. Monthly operating expenses are estimated to be: • Salaries: $32,000 • Delivery expense: 6 percent of monthly sales • Rent expense on the warehouse: $5,500 • Utilities: $1,100 • Insurance: $180 • Other expenses: $280 Required: 1. Compute the budgeted cost of purchases for each month in the second quarter. April May June Total cost of budgeted purchases 2. Complete the budgeted income statement for each month in the second quarter. CITRUS GIRL COMPANY Budgeted Income Statement For the Month Ending April 30 May 31 June 30 Budgeted Gross Margin Budgeted Net Operating Income

Answer 1

- Calculation and closing of cost of inventory and goods sold Budgeted Purchases Apr May June July Sales 240,000/210000 30000 110000 84000 132,000 4,000 Cost of 196000 [Hot Isoly Closing 125,200 39.600 113200 invently 7 [84000 1 132o4. I I Lovro 11 [132000 115440007 304 [30% of next month cogs opening inventory 28,800 25200 39,600 13200 (closing of previoy (196000 month Budgeted purchases 92.400 98,400 105600 (-opening inventory

2 Budgeted income statement April May Jure - Budgeted sales 240000 210000 330000 Less Cost of - goods sold - Gross magin 144000 126000 198000 -Less operating Expenses - Salaries (32000) (32000) (32000) Delivery expense (14400) (12600 (1980) [61 y sales] Rent expense (5500) 5500) (5500) utilities (lloo) (1100) (1100) Insurance (180) (180) (180) other expenses (280) I (280) (280) Net income 90540 74340 139140

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