PA8-6 Preparing Operating Budgets for a Merchandising Firm [LO 8-5, 8-3a, f, 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	Quarter 3	Quarter 4
Budgeted Unit Sales	32,000	52,000	26,000	52,000

Each T-shirt is expected to sell for $20.

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 30 percent of the next quarters sales demand.

Selling and administrative expenses are budgeted at $64,000 per quarter plus 16 percent of total sales revenue.

Required: 1. Determine budgeted sales revenue for each quarter.

Q1=

Q2=

Q3= 2. Determine budgeted cost of merchandise purchased for each quarter.

Q1=

Q2=

Q3=

3. Determine budgeted cost of good sold for each quarter.

Q1=

Q2=

Q3=

4. Determine selling and administrative expenses for each quarter.

Q1=

Q2=

Q3=