Red Canyon T-shirt Company operates a chain of T-shirt shops in the southwestern

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:

Each T-shirt is expected to sell for $21.

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 31 percent of the next quarter’s sales demand.

Selling and administrative expenses are budgeted at $62,000 per quarter plus 18 percent of total sales revenue.

Required:
1. Determine budgeted sales revenue for each quarter

2. Determine budgeted cost of merchandise purchased for each quarter

3. Determine budgeted cost of good sold for each quarter.

4. Determine selling and administrative expenses for each quarter.

5. Complete the budgeted income statement for each quarter.

Quarter 1 Quarter 2 Quarter 3 Quarter 4 Budgeted Unit Sales 31,000 51,000 25,500 51,000

Explanation / Answer

Budgeted sale revenue

Budgeted sale revenue

q1 q2 q3 Sales revenue 651000 1071000 535500 Merchandise purchased q1 q2 q3 sale units 31,000 51,000 25,500 Add: closing inventory 15810 7905 15810 total required 46,810 58,905 41,310 less : opening inve -9610 -15,810 -7,905 purchases 37,200 43,095 33,405 cost $8 $8 $8 total cost $297,600 $344,760 $267,240 Budgeted cost of goods sold q1 q2 q3 COGS 248000 408000 204000 Selling and administrative expense Q1 Q2 Q3 Expenses 62,000 62,000 62,000 percent of sale 117180 192780 96390 total cost 179,180 254,780 158,390 Budgeted income statement q1 q2 q3 Sale revenue 651000 1071000 535500 less :COGS 248000 408000 204000 Gross margin 403000 663000 331500 less:Expenses Selling and adm 179,180 254,780 158,390 Net income 223,820 408,220 173,110

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