Question

E8-20 (Algo) Preparing a Merchandise Purchases Budget and a Budgeted Income Statement [LO 8-3h, 8-5) 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 $300,000, $270,000, $390,000, and $170,000, respectively. 2. Cost of goods sold is 45 percent of expected sales. 3. CGC's desired ending inventory is 35 percent of the following month's cost of goods sold. 4. Monthly operating expenses are estimated to be: • Salaries: $38,000 • Delivery expense: 7 percent of monthly sales • Rent expense on the warehouse: $8,500 • Utilities: $1,700 • Insurance: $210 • Other expenses: $310 Required: 1. Compute the budgeted cost of purchases for each month in the second quarter. 2. Complete the budgeted income statement for each month in the second quarter. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Compute the budgeted cost of purchases for each month in the second quarter. April May June Total cost of budgeted purchases Required 1 Required 2 >

Answer 1

Answer is given below

Cost of Goods sold Sales COGS -45% April $300,000 $135,000 May $270,000 $121,500 June $390,000 $175,500 Quarter $960,000 $432,000 July $170,000 $76,500 1 Purchase Budget July $76,500 Budgeted COGS Add: Closing stock ( 35% of sale of following month) Total Needs Less Opening Stock Total cost of Budgeted Purchase (value) April $135,000 $42,525 $177,525 $47,250 $130,275 May $121,500 $61,425 $182,925 $42,525 $140,400 June Quarter $175,5001 $432,000 $26,775 $26,775 $202,275 $458,775 $61,425 $47,250 $140,850 $411,525 Opening stock of April - $135,000*35% Closing stock for June - $76,500* 35% Citrus Girl Company Budgeted Income Statement For the months ending April May June $300,000 $135,000 $165,000 $270,000 $121,500 $148,500 $390,000 $175,500 $214,500 Sales Less: Cost of Goods sold Budgeted Gross profit Less: Operating expenses Salaries Delivery expenses Rent expense of warehouse Utilities Insurance Other expenses Budgeted Net Operating Income $38,000 $21,000 $8,500 $1,700 $210 $310 $95,280 $38,000 $18,900 $8,500 $1,700 $210 $310 $80,880 $38,000 $27,300 7% of sales $8,500 $1,700 $210 $310 $138,480