Question

Semester Case - Cowboy Ice Cream, Inc. Assuming the expansion of CIC takes place, W.L. is trying to prepare a sales budget for the year following the expansion. Currently he's working on data for the wholesale division. Using the information compiled above, complete the following. Assume that selling and administrative expenses are 15% of sales revenue. During the first six months of the year, the price charged averaged $7.75 per unit. Round all computations to the nearest whole dollar. First Quarter Second Quarter Total Sales Revenue Cost of Goods Sold Gross Profit Selling and Admin. Expenses Net Income Frank, W.T.'s fellow shareholder, told W.1. he expects sales next year after the proposed expansion) to be 20 percent greater than the current year. Required Prepare a pro forma income statement including quarterly budgets for the first six months of next year, using Frank's estimate. First Quarter Second Quarter Total Sales Revenue Cost of Goods Sold Gross Profit Selling and Admin. Expenses Net Income

Answer 1

Income Statement for the Current two quarters
	1st Qtr	2nd qtr	Total
Sales Revenue	37,588	96,100	1,33,688
Cost of goods sold	21,180	59,925	81,105
Gross Profit	16,408	36,175	52,583
Selling & Administrative expenses	5,638	14,415	20,053
Net Income	10,769	21,760	32,529
Proforma Income Statement for the two quarters after expansion
	1st Qtr	2nd qtr	Total
Sales Revenue (increase by 20%)	45,105	1,15,320	1,60,425
Cost of goods sold	21,180	59,925	81,105
Gross Profit	23,925	55,395	79,320
Selling & Administrative expenses	6,766	17,298	24,064
Net Income	17,159	38,097	55,256
Answer to (a)
Ending Inventory as per FIFO method is as under
Ending Inventory in June	units	Dollars p.u	Amount(in $)
	300	4.9	1,470
	Total units purchase- 17550 Less :Total unit sold- 17250
Answer to (b)
Cost of goods sold in total and for each month for six months ending June 30
Month	Cost of goods sold	Calculation
Jan	6,125	(1250*4)+(250*4.5)
Feb	7,285	(750*4.5)+(850*4.6)
Mar	7,770	(350*4.6)+(1400*4.4)
Apr	14,620	(300*4.4)+(2800*4.75)
May	21,815	(100*4.75)+(4400*4.85)
June	23,490	(600*4.85)+(4200*4.9)
Total	81,105
Answer to (c )
Particulars	Amount ($)
A. Ending   Inventory as on 31 july	2,500.00
B. Cost of good sold (july )	24,194.70	($23490 x 1.03)
C.Beginning Inventory	1,470.00
D. Purchase (july)	25,224.70	(A+B-C)
Answer to (d)
Cash payment for inventory purchase in the month of July is $15,134.82
(60% of $25224.70)