Question

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: Quarter 1 Quarter 2 Quarter 3 Quarter 4 35,000 55,000 27,500 55,000 Budgeted unit sales • Each T-shirt is expected to sell for $10. • The purchasing manager buys the T-shirts for $4 each. • The company needs to have enough T-shirts on hand at the end of each quarter to fill 20 percent of the next quarter's sales demand. • Selling and administrative expenses are budgeted at $70,000 per quarter plus 12 percent of total sales revenue. Required: 1. Determine budgeted sales revenue for quarters 1, 2, and 3. 2. Determine budgeted cost of merchandise purchased for quarters 1, 2, and 3. 3. Determine budgeted cost of good sold for quarters 1, 2, and 3. 4. Determine selling and administrative expenses for quarters 1, 2, and 3. 5. Complete the budgeted income statement for quarters 1, 2, and 3.

Answer 1

	Budgeted sale revenue
			q1	q2	q3
	Sales revenue		350000	550000	275000
			Merchandise purchased
			q1	q2	q3
	sale units		35,000	55,000	27,500
	Add: closing inventory		11000	5500	11000
	total required		46,000	60,500	38,500
	less : opening inve		-7000	-11,000	-5,500
	purchases		39,000	49,500	33,000
	cost		$4	$4	$4
	total cost		$156,000	$198,000	$132,000
			Budgeted cost of goods sold
			q1	q2	q3
	COGS		140000	220000	110000
			Selling and administrative expense
			Q1	Q2	Q3
	Expenses		70,000	70,000	70,000
	percent of sale		42000	66000	33000
	total cost		112,000	136,000	103,000
			Budgeted income statement
			q1	q2	q3
	Sale revenue		350000	550000	275000
	less :COGS		140000	220000	110000
	Gross margin		210000	330000	165000
	less:Expenses
	Selling and adm		112,000	136,000	103,000
	Net income		98,000	194,000	62,000