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:

	Quarter 1	Quarter 2	Quarter 3	Quarter 4
Budgeted unit sales	48,000	76,000	38,000	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 quarters 1, 2, and 3.
2. Determine budgeted cost of merchandise purchased for quarters 1, 2, and 3.
3. Determine budgeted cost of good sold for quarters 1, 2, and 3.
4. Determine selling and administrative expenses for quarters 1, 2, and 3.
5. Complete the budgeted income statement for quarters 1, 2, and 3.

Part 1:

Budgeted Sales Revenue : Quarter 1: Quarter 2: Quarter 3:

Part 2:

Budgeted cost of Merchandise Purchased : Quarter 1 : Quarter 2 : Quarter 3 :

Part 3

Budgeted cost of goods sold : Quarter 1: Quarter 2: Quarter 3 :   

Part 4

Budgeted Selling ad administrative expenses : Quarter 1: quarter 2 : Quarter 3 :

.

Answer 1

Answer :

1. Computation of Budgeted sales revenue

	Quarter 1	Quarter 2	Quarter 3
Budgeted unit sale	48000	76000	38000
Selling price	$ 23	$ 23	$ 23
Budgeted sales revenue	$ 1104000	$ 1748000	$ 874000

2.Computation of budgeted cost of merchandise purchased

	Quarter 1	Quarter 2	Quarter 3
Budgeted sales unit	48000	76000	38000
ADD - Desired ending inventory	25080	12540	25080
Total required	73080	88540	63080
Less - Opening inventory	15840	25080	12540
Budgeted purchase	57240	63460	50540
Cost per unit	$ 9	$ 9	$ 9
budgeted cost of merchandise purchased	$ 515160	$ 571140	$ 454860

3.Computation of  budgeted cost of good sold

	Quarter 1	Quarter 2	Quarter 3
Budgeted sales unit	48000	76000	38000
Cost	$ 9	$ 9	$ 9
budgeted cost of good sold	$ 432000	$ 684000	$ 342000

4. Computation of Budgeted Selling and administrative expenses

	Quarter 1	Quarter 2	Quarter 3
Fixed selling and administrative expenses	$ 96000	$ 96000	$ 96000
Variable Selling and administrative expenses	$ 132480	$ 209760	$ 104880
Budgeted Selling and administrative expenses	$ 228480	$ 305760	$ 200880

5. budgeted income statement

	Quarter -1	Quarter -2	Quarter -3
Sales revenue	$ 1104000	$ 1748000	$ 874000
Less - cost of goods sold	$ 432000	$ 684000	$ 342000
Gross profit	$ 672000	$ 1064000	$ 532000
Less - Selling and administrative expenses	$ 228480	$ 305760	$ 200880
Budgeted net operating income	$ 443520	$ 758240	$ 331120