Question

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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: Budgeted Unit Sales Quarter 1 42,000 Quarter 2 64,000 Quarter 3 32,000 Quarter 4 64,000 • Each T-shirt is expected to sell for $17. • The purchasing manager buys the T-shirts for $7 each • The company needs to have enough T-shirts on hand at the end of each quarter to fill 27 percent of the next quarter's sales demand. Selling and administrative expenses are budgeted at $84,000 per quarter plus 14 percent of total sales revenue. Required: 1. Determine budgeted sales revenue for each quarter. Quarter 1 Quarter 2 s 714,000 $ 1,088,000 Quarter 3 $ 544,000 Budgeted Sales Revenue

Answer 1

Budgeted Income Statement
	Quarter 1	Quarter 2	Quarter 3
Budgeted Sales Revenue	$714,000	$1,088,000	$544,000
Less:
Budgeted Cost of Goods Sold	$329,640	$396,160	$275,840
Budgeted Gross Margin	$384,360	$691,840	$268,160
Less:
Budgeted Selling and Administrative Expenses	$183,960	$236,320	$160,160
Budgeted Net Operating Income	$200,400	$455,520	$108,000