6 value: 4.00 points PAB-6 Preparing Operating Budgets for a Merchandising Firm

Question

6 value: 4.00 points PAB-6 Preparing Operating Budgets for a Merchandising Firm [LO 8-5, 8-3a. g, h] 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 53,000 Quarter 3 26,500 Quarter 4 53,000 Budgeted Unit Sales 33,000 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 $66,000 per quarter plus 15 percent of total sales revenue. Required: 1. Determine budgeted sales revenue for each quarter. Quarter 1 Quarter 2 Quarter 3 Budgeted Sales Revenue

Explanation / Answer

Required Budgets are as prepared below:

Red Canyon T Shirt Company Sales Budget Quarter   Particulars Quarter 1 Quarter 2 Quarter 3 Budgeted Sales units 33,000 53,000 26,500 Unit selling price 19 19 19 Budgeted Sales Revenue 627,000 1,007,000 503,500 Red Canyon T Shirt Company Merchandise Purchase Budget Quarter   Particulars Quarter 1 Quarter 2 Quarter 3 Sales in units 33,000 53,000 26,500 Add: Desired Ending merchandise inventory 15,370 7,685 15,370 Total needs 48,370 60,685 41,870 Less: beginning merchandise inventory 9,570 15,370 7,685 Required purchase 38,800 45,315 34,185 Cost of 1 Tshirt 8 8 8 Budgeted Cost of merchandise purchased 310,400 362,520 273,480 Cost of goods sold    Quarter   Particulars Quarter 1 Quarter 2 Quarter 3 Budgeted Sales units 33,000 53,000 26,500 Cost of Sales 8 8 8 Budgeted Cost of goods sold 264,000 424,000 212,000 Red Canyon T Shirt Company Selling and administrative exp Budget Quarter   Particulars Quarter 1 Quarter 2 Quarter 3 Selling and administrative exp Budget Budgeted selling and administrative $66,000 $66,000 $66,000 15% of total sales revenue $94,050 $151,050 $75,525 Budgeted S&A Expenses $160,050 $217,050 $141,525 Red Canyon T Shirt Company Budgeted Income Statement Quarter   Particulars Quarter 1 Quarter 2 Quarter 3 Budgeted Sales Revenue 627,000 1,007,000 503,500 less: Budgeted Cost of goods sold $264,000 $424,000 $212,000 Budgeted Gross margin $363,000 $583,000 $291,500 Less: Budgeted selling and administative exp $160,050 $217,050 $141,525 Budgeted Net operating Income $202,950 $365,950 $149,975

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