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 57,000 Quarter 3 28,500 Quarter 4 57,000 Budgeted Unit Sales 37,000 Each T-shirt is expected to sell for $12. The purchasing manager buys the T-shrts for $5 each. The company needs to have enough T-shirts on hand at the end of each quarter to fill 22 percent of the next quarter's sales demand. Selling and administrative expenses are budgeted at $74,000 per quarter plus 20 percent of total sales revenue Required 1. Determine budgeted sales revenue for each quarter Quarter 1 Quarter 2 Quarter 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

Explanation / Answer

Budget Sales Q1 Q2 Q3 Q4 Units 37000 57000 28500 57000 Selling price 12 12 12 12 Budget Sales 444000 684000 342000 684000 Budgeted Cost Opening stock 0 12540 6270 Closing Stock 12540 6270 12540 sales units 37000 57000 28500 57000 Purchases 49540 50730 34770 Budget for cost of goods sold Purchase price 5 5 5 Units purchased 49540 50730 34770 Purchase 247700 253650 173850 Selling and administration expenses S & A expenses 162800 210800 142400 Income Statement Sales 444000 684000 342000 closing Stock @ $ 5 62700 31350 62700 Less: Opening Stock @ $ 5 0 62700 31350 Purchases 247700 253650 173850 Budgeted Gross Margin 259000 399000 199500 Less: S & A expenses 162800 210800 142400 B.Net Operating Income 96200 188200 57100

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