Question

The following information is available for Pioneer Company:

• Sales price per unit is $110.
• November and December, sales were budgeted at 3,040 and 3,530 units, respectively.
• Variable costs are 12 percent of sales (4 percent commission, 3 percent advertising, 5 percent shipping).
• Fixed costs per month are sales salaries, $5,300; office salaries, $2,300; depreciation, $2,400; building rent, $3,700; insurance, $1,700; and utilities, $900.

Required:

Determine Pioneer's budgeted selling and administrative expenses for November and December.

Citrus Girl Company (CGC) purchases quality citrus produce from local growers and sells the produce via the Internet across the United States. To keep costs down, CGC maintains a warehouse, but no showroom or retail sales outlets. CGC has the following information for the second quarter of the year:

1. Expected monthly sales for April, May, June, and July are $260,000, $230,000, $350,000, and $130,000, respectively.
2. Cost of goods sold is 30 percent of expected sales.
3. CGC’s desired ending inventory is 40 percent of the following month’s cost of goods sold.
4. Monthly operating expenses are estimated to be:

• Salaries: $34,000
• Delivery expense: 8 percent of monthly sales
• Rent expense on the warehouse: $6,500
• Utilities: $1,300
• Insurance: $240
• Other expenses: $340

Required:

1. Compute the budgeted cost of purchases for each month in the second quarter.

2. Complete the budgeted income statement for each month in the second quarter.

Answer 1

Workings	November	December
Sales price per unit	110	110
Number of units	3040	3530
Sales value	334400	388300
Budgeted Selling and adminisrative expenses of Pioneer company
Variable costs
Commission	13376	15532
Advertising	10032	11649
Shipping	16720	19415
Fixed Costs
Sales salaries	5300	5300
office salaries	2300	2300
depreciation	2400	2400
Building rent	3700	3700
Insurance	1700	1700
Utilities	900	900
Total Selling and adminisrative expenses	56428	62896

1) Budgeted cost of purchases for each month in the second quarter.
Particulars	April	May	June
Cost of goods sold	78000	69000	105000
Add: Closing inventory	27600	42000	15600
Less: Opening inventory	-31200	-27600	-42000
Budgeted cost of purchases	74400	83400	78600

2) Budgeted income statement for each month in the second quarter
Particulars	April	May	June
Budgeted sales	260000	230000	350000
Budgeted purchases	-74400	-83400	-78600
Closing stock	27600	42000	15600
Less: Opening stock	-31200	-27600	-42000
Gross Profit	182000	161000	245000
Less: Indirect expenses
Salaries	34000	34000	34000
Delivery expenses	20800	18400	28000
Warehouse rent	6500	6500	6500
Utilities	1300	1300	1300
Insurance	240	240	240
Other expenses	340	340	340
Total	63180	60780	70380
Budgeted Income	118820	100220	174620