The budget committee of Suppar Company collects the following data for its San M

Question

The budget committee of Suppar Company collects the following data for its San Miguel Store in preparing budgeted income statements for May and June 2017.

1. Sales for May are expected to be $804,000. Sales in June and July are expected to be 5% higher than the preceding month. 2. Cost of goods sold is expected to be 75% of sales. 3. Company policy is to maintain ending merchandise inventory at 10% of the following month’s cost of goods sold. 4. Operating expenses are estimated to be as follows:

Explanation / Answer

San Miguel Store

Budgeted Income Statement for May and June 2017

Particulars May June Revenues: Sales $804,000 $844,200 Total Revenues $804,000 $844,200 Less: Cost of Goods Sold $603,000 $633,150 Gross Profit $201,000 $211,050 Less : Operating Expenses: Sales Salaries $28,400 $28,400 Advertising $48,240 $50,652 Delivery Expenses $16,080 $16,884 Sales Commissions $40,200 $42,210 Rent Expense $5,750 $5,750 Depreciation $820 $820 Utilities $680 $680 Insurance $550 $550 Interest Expense $2,000 $2,000 Total Expenses $142,720 $147,946 Net Profit Before Taxes $58,280 $63,104 Tax Expense @30% $17,484 $18,931.20 Net Profit after Taxes $40,796 $44,172.80

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