Red Canyon T-shirt Company operates a chain of T-shirt shops in the southwestern
ID: 2572230 • Letter: R
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 t coming year, along with the following information: Quarter 1 Quarter 2 56,000 Quarter 3 Quarter 4 56,000 Budgeted Unit Sales Each T-shirt is expected to sell for $11. The purchasing manager buys the T-shirts for $4 each. The company needs to have enough T-shirts on hand at the end of each quarter to fill 21 percent of the next quarter's sales demand. Selling and administrative expenses are budgeted at $72,000 per quarter plus 10 percent of total sales revenue. Required: 1. Determine budgeted sales revenue for each quarter. 2. Determine budgeted cost of merchandise purchased for each quarter 3. Determine budgeted cost of good sold for each quarter. 4. Determine selling and administrative expenses for each quarter. 5. Complete the budgeted income statement for each quarter.Explanation / Answer
Solution:
Part 1 --- Budgeted Sales Revenue
Budgeted Sales Revenue
Quarter 1
Quarter 2
Quarter 3
Quarter 4
Budgeted Unit Sales (a)
36,000
56,000
28,000
56,000
Per unit selling price (b)
$11
$11
$11
$11
Budgeted Sales Revenue in dollars (a*b)
$396,000
$616,000
$308,000
$616,000
Part 2 – Budgeted cost of merchandise purchased
Budgeted Cost of Merchandise Purchased
Quarter 1
Quarter 2
Quarter 3
Quarter 4
Expected Units to be sold
36,000
56,000
28,000
56,000
Plus: Desired Finished Goods Ending Inventory (21% of next month's sales)
11760
5880
11760
Total Needs
47760
61880
39760
56000
Less Beginning Finished Goods Inventory (Ending inventory of last month)
7560
11760
5880
11760
Budgeted Units of Merchandise PURCHASED
40200
50120
33880
44240
Unit Cost of Material
$4
$4
$4
$4
Budgeted Cost of Merchandise Purchased
$160,800
$200,480
$135,520
$176,960
Part 3 --- Budgeted Cost of Goods Sold
Budgeted Cost of Goods Sold
Quarter 1
Quarter 2
Quarter 3
Quarter 4
Budgeted Sales Units
36,000
56,000
28,000
56,000
Unit Cost
$4
$4
$4
$4
Budgeted Cost of Goods Sold
$144,000
$224,000
$112,000
$224,000
Part 4 – Selling and Administrative Expenses
Selling and Administrative Expense
Quarter 1
Quarter 2
Quarter 3
Quarter 4
Budgeted Sales Revenue in dollars (from part 1)
$396,000
$616,000
$308,000
$616,000
Variable Selling and administrative expenses (% on sales)
10%
10%
10%
10%
Variable Selling and administrative expenses
$39,600
$61,600
$30,800
$61,600
Fixed Selling and administrative expenses
$72,000
$72,000
$72,000
$72,000
Total Selling and Administrative Expense
$111,600
$133,600
$102,800
$133,600
Part 5 – Budgeted Income Statement
Budgeted Income Statement
Quarter 1
Quarter 2
Quarter 3
Quarter 4
Budgeted Sales Revenue in dollars (from part 1)
$396,000
$616,000
$308,000
$616,000
Less: Cost of Goods Sold (from part 3)
$144,000
$224,000
$112,000
$224,000
Gross Profit
$252,000
$392,000
$196,000
$392,000
Less: Sellnig and administrative expense (from part 4)
$111,600
$133,600
$102,800
$133,600
Budgeted Income
$140,400
$258,400
$93,200
$258,400
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Budgeted Sales Revenue
Quarter 1
Quarter 2
Quarter 3
Quarter 4
Budgeted Unit Sales (a)
36,000
56,000
28,000
56,000
Per unit selling price (b)
$11
$11
$11
$11
Budgeted Sales Revenue in dollars (a*b)
$396,000
$616,000
$308,000
$616,000
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