Red Canyon T-shirt Company operates a chain of T-shirt shops in the southwestern

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 44,000 Quarter 2 68,000 Quarter 3 34,000 Quarter 4 68,000 Budgeted Unit Sales .Each T-shirt is expected to sell for $19 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 29 percent of the next quarter's sales demand. Selling and administrative expenses are budgeted at $88,000 per quarter plus 16 percent of total sales revenue. Required: 1. Determine budgeted sales revenue for each quarter. Quarter 1 Quarter 2Quarter 3 Budgeted Sales Revenue 2. Determine budgeted cost of merchandise purchased for each quarter. Quarter 1 Quarter 2 Quarter 3 Budgeted Cost of Merchandise Purchased 3. Determine budgeted cost of good sold for each quarter. Quarter 1 Quarter 2 Quarter 3 Budgeted Cost of Goods Sold 4. Determine selling and administrative expenses for each quarter. Quarter 1 Quarter 2 Quarter 3 Budgeted Selling and Administrative Expenses

Explanation / Answer

Firstly we need to find out closing stock and opening stock for each quarter.

The opening stock of quarter 1 is zero.

The closing stock and opening stock for each quarter is as follows:

Now that we found out opening and closing stock for three quarters we can find out Purchase requirement for each quarter.

We can answer all the above questions with the help of single table i.e., Income statement

Note:The highlighted rows are answers for each question asked above.

Particulars Q1 Q2 Q3 Opening stock 0 19720 9860 Closing stock(29% of next quarter expected sales) 68000 x 29% = 19720 34000 x 29% = 9860 68000 x 29% = 19720

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