Question

Slate Corner Shoppe is a local convenience store with the following? information:

October sales were $290,000

Sales are projected to go up by 12?% in November (from the October ?sales) and another 20?% in December ?(from the November ?sales) and then return to the October level in January.

25% of sales are made in? cash, while the remaining 75?% are paid by credit or debit cards. The credit card companies and banks? (debit card? issuers) charge a 5?% transaction? fee, and deposit the net amount? (sales price less the transaction? fee) in the?store's bank account daily.??

Slate Corner? Shoppe's gross profit is 40?% of its sales revenue.???

For the next several? months, the store wants to maintain an ending merchandise inventory equal to $19,000 ?+ 25?% of the next? month's cost of goods sold. The September 30 inventory was $62,500.

Expected monthly operating expenses? include:

Wages of store workers are $9,400 per month

Utilities expense of $1,400 in November and $2,000 in December

Property tax expense of $2,700 per month

Property and liability insurance expense of $600 per month

Depreciation expense of $5,500 per month

Transaction? fees, as stated? above, are 5?% of credit and debit card sales

Prepare the following budgets for November and December 1. Sales Budget 2. Cost of goods sold, inventory, and purchases budget 3. Operating expense budget 4. Budgeted income statement

Answer 1

1.Sales Budget:

In November, Sales = 290,000 *(100+12)% = 324800

In December, Sales = 324800*(100+20)% = 389760

In January, Sales = 290,000

2.Cost of Goods Sold,Inventory,Purchase Budget:

Closing Stock of September = 62500

Therefor, 62500 = 19000 + 25% of COGS of October ------(As per Question)

COGS for October = (62500 -19000)/25% = 174000

COGS for November = Sales of Nov. - GP of Nov. = 324800 - (40% *324800) = 194880

COGS for December = Sales of Dec - GP for Dec. = 379760 - (40%*379760) = 233856

COGS for January = Sales of Jan - GP for Jan. = 290000 - (40%*290000) = 174000

Closing Stock = 19000+(25%* Next month COGS) ---- (Given in Question)

Closing Stock for October = 19000+ (25% *194880) = 67720

Closing Stock for November = 19000+ (25%*233856) =77464

Closing Stock for December = 19000 + (25%* 174000) = 62500

COGS = Opening Inventory + Purchase -Closing Inventory

Purchase of Novenber = COGS - Opening Inventory +Closing Inventory

= 194880 - 67720+77464 = 204624

Purhcase of December = 233856 -77464 +62500 = 218892

3.Operating Expenses Budget:

	November	December
Wages of Store	9400	9400
Utilities od Expenses	1400	2000
Property Tax	2700	2700
Property & Liability Insurance	600	600
Depreciation	5500	5500
Transaction Fees	12180	14616
	31780	34816

(Transaction Fees = Particulars month Sales * 75% *5%)

4 Budgeted Income Statement:

	November	December
Sales	324800	389760
Less :COGS	194880	233856
Gross Profit	129920	155904
Less:Operating Expenses	31780	34816
Net Income	98140	121088