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	31,000	51,000	25,500	51,000

Each T-shirt is expected to sell for $21.

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 31 percent of the next quarter’s sales demand.

Selling and administrative expenses are budgeted at $62,000 per quarter plus 18 percent of total sales revenue.

1. Determine budgeted sales revenue for each quarter.
Budgeted Sales Revenue  
Quarter1:

Quarter 2:

Quarter 3:

2. Determine budgeted cost of merchandise purchased for each quarter.
Budgeted Cost of Merchandise Purchased
Quarter1:

Quarter 2:

Quarter 3:

3. Determine budgeted cost of good sold for each quarter.
Budgeted Cost of Goods Sold
Quarter1:

Quarter 2:

Quarter 3:

4. Determine selling and administrative expenses for each quarter.

Budgeted Selling and Administrative Expenses

Quarter1:

Quarter 2:

Quarter 3:

Complete the budgeted income statement for each quarter.

Answer 1