Question

fied 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 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. • Selling 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 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

Answer 1

Solutions:

D Red Canyon T-shirt Company 4 Sales Budget 5 Particulars 6 Quarter 2 Quarter 3 Quarter 1 Budgeted Unit sales Selling Price per unit Budgeted Sales revenue 33000 7 53000 26500 $19.00 $19.00 $19.00 8 $627,000 $1,007,000 $503,500 10 11 12 13 Red Canyon T-shirt Company 14 Budgeted cost of merchandise purchases Particulars 15 Quarter 1 Quarter 2 Quarter 3 Budgeted unit sales Add: Required ending Inventory (29% of next quarter's sales) Total Needs 16 33000 53000 26500 17 15370 7685 15370 41870 18 48370 60685 Less: Opening Inventory Required Purchases in units Cost per unit of T-shirt Budgeted cost of merchandise purchases 15370 19 9570 7685 45315 34185 20 38800 $8.00 $8.00 $8.00 21 $310,400 $362,520 $273,480 22 23 24 25 Red Canyon T-shirt Company Budgeted Cost of goods sold 26 27 Particulars Quarter 2 Quarter 3 Quarter 1 Budgeted Unit sales Cost per unit Budgeted Cost of goods sold 53000 28 33000 26500 $8.00 $8.00 $8.00 29 $424,000 $264,000 $212,000 30 31 Red Canyon T-shirt Company Budgeted Selling and administrative expenses 32 33 34 Particulars Quarter 1 Quarter 2 Quarter 3 $627,000 $1,007,000 $503,500 35 Budgeted Sales Revenue 36 Variable Selling and administrative expense (15%) Fixed Selling and administrative expense Budgeted Selling and administrative expenses $94,050 $151,050 $75,525 37 $66,000 $66,000 $66,000 38 $217,050 $160,050 $141,525 39 40 41 Red Canyon T-shirt Company 42 43 Budgeted Income Statement 44 Particulars Quarter 3 Quarter 1 Quarter 2 Budgeted Sales Revenue Less: Cost of goods sold Budgeted gross Margin Less: Budgeted Selling and administrative expenses $627,000 $1,007,000 $503,500 45 $264,000 $424,000 $212,000 46 $363,000 $583,000 $291,500 47 $160,050 $217,050 $141,525 48 49 Budgeted Net operating income $202,950 $365,950 $149,975 50 51 756 (4) Sheet156 (23) Sheet937 Sheet939 Sheet940