Red Canyon T-shirt Company operates a chain of T-shirt shops in the southwestern
ID: 2556960 • Letter: R
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 $15.
The purchasing manager buys the T-shirts for $6 each.
The company needs to have enough T-shirts on hand at the end of each quarter to fill 25 percent of the next quarter’s sales demand.
Selling and administrative expenses are budgeted at $80,000 per quarter plus 10 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.
Explanation / Answer
Answer
Q1
Q2
Q3
Q4
Budgeted Unit Sales
40000
60000
30000
60000
Sale price per unit (in $)
15
15
15
15
Budgeted Sales Revenue (in $)
600000
900000
450000
900000
Q1
Q2
Q3
Q4
Budgeted Unit Sales
40000
60000
30000
60000
(+) Expected ending Inventory
15000
7500
15000
0
Total requirement
55000
67500
45000
60000
(-) Beginning Inventory
0
15000
7500
15000
T Shirts to be purchased
55000
52500
37500
45000
Budgeted Cost of merchandise at $6
$ 3,30,000.00
$ 3,15,000.00
$ 2,25,000.00
$ 2,70,000.00
Q1
Q2
Q3
Q4
Beginning Inventory at $6
$ -
$ 90,000.00
$ 45,000.00
$ 90,000.00
(+) Purchases
$ 3,30,000.00
$ 3,15,000.00
$ 2,25,000.00
$ 2,70,000.00
(-) Ending Inventory at $6
$ 90,000.00
$ 45,000.00
$ 90,000.00
$ -
Cost of Goods Sold
$ 2,40,000.00
$ 3,60,000.00
$ 1,80,000.00
$ 3,60,000.00
Q1
Q2
Q3
Q4
Budgeted Sales Revenue
$ 6,00,000.00
$ 9,00,000.00
$ 4,50,000.00
$ 9,00,000.00
Fixed Selling & Administrative expenses
$ 80,000.00
$ 80,000.00
$ 80,000.00
$ 80,000.00
Variable expense [10% of revenue]
$ 60,000.00
$ 90,000.00
$ 45,000.00
$ 90,000.00
Total Budgeted Selling & Administrative expense
$ 1,40,000.00
$ 1,70,000.00
$ 1,25,000.00
$ 1,70,000.00
Q1
Q2
Q3
Q4
Budgeted Sales Revenue
$ 6,00,000.00
$ 9,00,000.00
$ 4,50,000.00
$ 9,00,000.00
(-) Cost of goods Sold
$ 2,40,000.00
$ 3,60,000.00
$ 1,80,000.00
$ 3,60,000.00
Gross Profits
$ 3,60,000.00
$ 5,40,000.00
$ 2,70,000.00
$ 5,40,000.00
(-) Selling & Administrative expense
$ 1,40,000.00
$ 1,70,000.00
$ 1,25,000.00
$ 1,70,000.00
Net Income (Loss)
$ 2,20,000.00
$ 3,70,000.00
$ 1,45,000.00
$ 3,70,000.00
Q1
Q2
Q3
Q4
Budgeted Unit Sales
40000
60000
30000
60000
Sale price per unit (in $)
15
15
15
15
Budgeted Sales Revenue (in $)
600000
900000
450000
900000
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