Question

PA8-6 Preparing Operating Budgets for a Merchandising Firm (LO 8-5, 8-30, 1.g. h] Red Canyon T-shirt Company operates a chain of T-shirt shops in the southwester United States. The sales manager has provided a sales forecast for the coming year, along with the following information Budgeted Unit Sales Quarter 1 33,000 Quarter 2 53.000 Quarter 3 26,500 Quarter 4 53.000 • Each T-shirt is expected to sell for $19. • The purchasing manager buys the T-shirts for $8 each • The company needs to have enough T-shirts on hand at the end of each quarter to fill 29 percent of the next quarter's sales demand • Seling and administrative expenses are budgeted at $66.000 per quarter plus 15 percent of total sales revenue Required: 1. Determine budgeted sales revenue for each quarter Quarter Quarter 2 Quarter 3 Budgeted Sales Revenue 2. Determine budgeted cost of merchandise purchased for each quarter. Quarter Quarter 2 Quarter 3 Budgeted Cost of Merchandise Purchased

Answer 1

33000 53000 26500 Auss- Budgeted sales Revenue & I Quarter & Quarter 2 Quarter 3 | Budgeted unit Sales selling price per unit Buogeled Seeles leevenuel $627,000 $1007,000 $503,500 © Budgeted cost of merchandise Purchased $19 $19 $19 I Quarter 2 53000 Quarter 3 26 500 Quarter I | Budgeted sales I'm Unit) 33000 Acthy closing Inventory 15,370 Units required 48,370 Less: Beginning Inventory 9570 units required to be 38800 - Punhese Cost per unit $ 8 Budgeted Cost of merchandise $310,400 7685 - 60,685 15,370 45,315 15,370 41,870 7685 34,185 $360,520 $273,480 * Budgeted cost of woods sold er T Quarter 1 33000 Quarter a 53000 Quarter 3 Gj70 Unit Sales Cost per Corit $ 8 $8 249,000 Budgeted Cost of Goods SH 40864,000 $400,000

ing and administraline Expense - Quarler y $627,000 | Budgeted sales revene Variable selling s Admin. Exp. 1894,650 fixed selling and colmini. Exp. $66,000 Total selling & Admini ears. $160.050 1 Quarter 2 | $1007,000 $ 151,050 466,000 | $217,050 Quarter 3 $503,500 $75,525 $66.000 | $141,585
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