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: Budgeted Unit Sales Quarter 1 48,000 Quarter 2 76,000 Quarter 3 38,000 Quarter 4 76,000 . Each T-shirt is expected to sell for $23. • The purchasing manager buys the T-shirts for $9 each. • The company needs to have enough T-shirts on hand at the end of each quarter to fill 33 percent of the next quarter's sales demand. • Selling and administrative expenses are budgeted at $96,000 per quarter plus 12 percent of total sales revenue. Required: 1. Determine budgeted sales revenue for each quarter. Quarter 1 Quarter 2 Quarter 3 Budgeted Sales Revenue Revenue 2. Determine budgeted cost of merchandise purchased for each quarter. Quarter 1 Quarter 2 Quarter 3 Budgeted Cost of Merchandise Purchased

Answer 1

Assumptions:

1. Opening stock has been assumed as NIL.

2. As per the question "Selling expenses are budgeted at...plus 12% of total sales revenue". It has been assumed that the same refers to "12% of total sales revenue per quarter"

Budgeted Sales Revenue atre I ator 2 Atr 3 38000 thit Sales X Selling Price per unit Sales Revenue 48000 23 1104000 76000 23 1748,000 874000 Budgeted last of Merchandise purchased Otr 1 Atr 2 Otr 3 Material Required - Current Otr - Next Atr (33%) by food 48000 25000 73080 (76000-25080) 50920 12540 63460 (38000 - 12540) 25460 25000 50540 x Price her unit Budgeted Caet for atr 657720 571140 454860 Chening stock has been assumed as NIL.

Atr 2 NIL ② Budgeted last of Goods Sold Atr I Chening Stock Add Qurchase & Part 23 73080 Les closing stock (25080) COGS (Units 48000 X Price her Unit Budgeted COGS 432,000 - 25080 63460 (12540) 76000 Atr 3 12540 50540 (25080) 38000 684000 34 2000

@ Selling & Alma Lapsense for each Allestos " - Atrl Otr 2 Atr3 - Achenses (Common) 96000 96000 96000 Revenue [ Belen Part 01 TOTAL S & D rochenses 132480 228480 209760 305760 104ppo 200880

© Budestad Encome Statement - Otel Otr 2 Otr 3 1104,000 1748,000 - Revenue & Part 0} Less Cost of Goods Solds Part 3 BUDGETED GROSS MARGIN (432000 672000 (684000) 1064000 874000 (342000) 532000 Selling & Distt. hah. {Part 6} (228480) (209760) (104880) im 443520 854240 427120 um