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 Quarter 2 Quarter 3 Quarter 4 Budgeted Unit Sales 44,000 68,000 34,000 68,000 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 $88,000 per quarter plus 16 percent of total sales revenue. Determine budgeted cost of merchandise purchased for each quarter.

Explanation / Answer

Budgeted cost of merchandise purchased for each quarter is as determined below:

Red Canyon T Shirt Company Merchandise Purchase Budget Quarter   Particulars Quarter 1 Quarter 2 Quarter 3 Sales in units 44,000 68,000 34,000 Add: Desired Ending merchandise inventory 19,720 9,860 19,720 Total needs 63,720 77,860 53,720 Less: beginning merchandise inventory 12,760 19,720 9,860 Required purchase 50,960 58,140 43,860 Cost of 1 Tshirt 8 8 8 Budgeted Cost of merchandise purchased 407,680 465,120 350,880

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