Question

Citrus Girl Company (CGC) purchases quality citrus produce from local growers and sells the produce via the Intemet 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 $140,000, $110,000, $230,000, and $50,000, respectively 2. Cost of goods sold is 15 percent of expected sales. 3. CGC's desired ending inventory is 25 percent of the following month's cost of goods sold 4. Monthly operating expenses are estimated to be: . Salaries: $37,000 Delivery expense: 7 percent of monthly sales Rent expense on the warehouse: $2,500 Utilities: $500 Insurance: $150 Other expenses: $250 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

1. Calculation of budgeted cost of purchase for each month in the second quarter -

	April	May	June	July
Sales	140000	110000	230000	50000
Cost of Sales 15% of Sales	21000	16500	34500	7500
Desired Ending Inventory (25% of Following Month COGS)	4125	8625	1875
Total Inventory needs	25125	25125	36375
Less : Beginning inventory	5250	4125	8625
Budgeted Purchase	19875	21000	27750

2)Computation of budgeted income for the second quarter -

Particulars	April	May	June
Revenue from sales	140000	110000	230000
Less : COGS	21000	16500	34500
Gross Margin	119000	93500	195500
Less : Monthly operating expenses
salaries	37000	37000	37000
Deliveiry expenses(7% of sales)	9800	7700	16100
Rent of warehouse	2500	2500	2500
utilities	500	500	500
insurance	150	150	150
other expenses	250	250	250
Total operating Expenses	50200	48100	56500
Net Income	68800	45400	139000