Question

PA8-6 Preparing Operating Budgets for a Merchandising Firm (LO 8-5, 8-3a, 6 g, h) 

Red Canyon T-shirt Company operates a chain of T-shirt shop 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
Budgeted Unit Sales	33,000	53.000	26,500	53,000

    

• Each T-shirt is expected to sell for $19. 

• The purchasing manager buys the T-shirts for 58 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. 

• Seling and administrative expenses are budgeted at $66,000 per quarter plus 15 percent of total sales revenue.

5. Complete the budgeted income statement for each quarter. 

Answer 1

Soltion: