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 47,000 Quarter 2 74,000 Quarter 3 37,000 Quarter 4 74,000 Each T-shirt is expected to sell for $22. 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 32 percent of the next quarter’s sales demand. Selling and administrative expenses are budgeted at $94,000 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.

Answer 1

1) Budgeted Sales Revenue	Quarter 1	Quarter 2	Quarter 3	Quarter 4
Budgeted Unit Sales	47000	74000	37000	74000
Budgeted Unit Selling Price	$22	$22	$22	$22
Budgeted Sales in dollars	$1,034,000	$1,628,000	$814,000	$1,628,000
2) Budgeted Cost of Merchandise Purchased for each quarter
	Quarter 1	Quarter 2	Quarter 3	Quarter 4
Budgeted Unit Sales	47000	74000	37000	74000
Plus: Desired Ending Inventory (32% of next quarter's sales demand)	23680	11840	23680	Missing info in the question
Total Needs	70680	85840	60680
Less: Beginning Inventory (last quarter ending inventory)	15040	23680	11840
Budgeted Purchases Units	55640	62160	48840
Unit Purchase Cost	$9	$9	$9
Budgeted cost of merchandise purchased	$500,760	$559,440	$439,560
3) Budgeted Cost of Goods Sold
	Quarter 1	Quarter 2	Quarter 3	Quarter 4
Budgeted cost of merchandise Purchased (Budgeted Cost of Goods Sold)	$500,760	$559,440	$439,560
4) Selling and Administrative Expenses
	Quarter 1	Quarter 2	Quarter 3	Quarter 4
Variable Selling and administrative expense (10% of total sales revenue)	$103,400	$162,800	$81,400	$162,800
Plus: Fixed S&A Expense	$94,000	$94,000	$94,000	$94,000
Total Budgeted S&A Expense	$197,400	$256,800	$175,400	$256,800
5) Budgeted Income Statement
	Quarter 1	Quarter 2	Quarter 3	Quarter 4
Budgeted sales in dollars	$1,034,000	$1,628,000	$814,000	$1,628,000
Less: Budgeted Cost of Goods Sold	$500,760	$559,440	$439,560
Gross Profit	$533,240	$1,068,560	$374,440
Less: S&A Expense	$197,400	$256,800	$175,400
Operating Income	$335,840	$811,760	$199,040

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