PA8-6 Preparing Operating Budgets for a Merchandising Firm [LO 8-5, 8-3a, f, g,
ID: 2565169 • Letter: P
Question
PA8-6 Preparing Operating Budgets for a Merchandising Firm [LO 8-5, 8-3a, f, g, h] Red Canyon shirtCompany operates a chain of T-shirt shops in the southwestem United States. The sales manager has provided a sales forecast for the coming year, along with the following information: Quarter 1 Quarter 2 70,000 Quarter 3 35,000 Quarter 4 70,000 Budgeted Unit Sales 45,000 Each T-shirt is expected to sell for $20. 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 30 percent of the next quarter's sales demand Selling and administrative expenses are budgeted at $90,000 per quarter plus 18 percent of total sales revenue Required: 1. Determine budgeted sales revenue for each quarter. Quarter 1 Quarter 2 Quarter 3 Budgeted Sales Revenue 2. Determine budgeted cost of merchandise purchased for each quarter Quarter 1 Quarter 2 Quarter 3 Budgeted Cost of Merchandise PurchasedExplanation / Answer
1.
Particulars
Q1
Q2
Q3
Q4
Budgeted Sales
45,000
70,000
35,000
70,000
Selling Price per unit
$ 20
$ 20
$ 20
$ 20
Budgeted Sales Revenue
$ 900,000
$ 1,400,000
$ 700,000
$ 1,400,000
2.
Particulars
Q1
Q2
Q3
Q4
Budgeted Sales
45,000
70,000
35,000
70,000
Add: Ending Inventory
21,000
10,500
21,000
Available Sales in Units
66,000
80,500
56,000
70,000
Less: Beginning Inventory
(13,500)
(21,000)
(10,500)
(21,000)
Require Purchases
52,500
59,500
45,500
49,000
Purchase cost per Unit
$ 8
$ 8
$ 8
$ 8
Budgeted Cost of Merchandise purchased
$ 420,000
$ 476,000
$ 364,000
$ 392,000
3.
Particulars
Q1
Q2
Q3
Q4
Budgeted Sales
45,000
70,000
35,000
70,000
Purchase cost per Unit
$ 8
$ 8
$ 8
$ 8
Budgeted Cost of Goods Sold
$ 360,000
$ 560,000
$ 280,000
$ 560,000
4.
Particulars
Q1
Q2
Q3
Q4
Budgeted Sales
45,000
70,000
35,000
70,000
Selling Price per unit
$ 20
$ 20
$ 20
$ 20
Sales
$ 900,000
$ 1,400,000
$ 700,000
$ 1,400,000
Selling and Administrative Expenses
Fixed
$ 90,000
$ 90,000
$ 90,000
$ 90,000
Variable @ 18% on sales
$ 162,000
$ 252,000
$ 126,000
$ 252,000
Budgeted sales and administrative Expenses
$ 252,000
$ 342,000
$ 216,000
$ 342,000
As per rule answered 1 – 4.
Particulars
Q1
Q2
Q3
Q4
Budgeted Sales
45,000
70,000
35,000
70,000
Selling Price per unit
$ 20
$ 20
$ 20
$ 20
Budgeted Sales Revenue
$ 900,000
$ 1,400,000
$ 700,000
$ 1,400,000
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.