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 41,000 Quarter 2 62,000 Quarter 3 31,000 Quarter 4 62,000 Budgeted Unit Sales Each T-shirt is expected to sell for $16. The purchasing manager buys the T-shirts for $6 each. The company needs to have enough T-shirts on hand at the end of each quarter to fill 26 percent of the next quarter's sales demand. Selling and administrative expenses are budgeted at $82,000 per quarter plus 12 percent of total sales revenue. Required: 1. Determine budgeted sales revenue for each quarter. 2. Determine budgeted cost of merchandise purchased for each quarter. Answer is complete but not entirely correct. Quarter 1 Quarter 2 Quarter 3 Budgeted Cost of Merchandise Purchased $ 246,000 $ 372,000 X $ 186,000 3. Determine budgeted cost of good sold for each quarter. Answer is complete but not entirely correct. Quarter 1 Quarter 2 Quarter 3 Budgeted Cost of Goods Sold $ 213,240 X $ 420,360 X $ 137,640 X 5. Complete the budgeted income statement for each quarter. X Answer is complete but not entirely correct. RED CANYON T-SHIRT COMPANY Budgeted Income Statement Quarter 1 Quarter 2 Quarter 3 Budgeted Sales Revenue $ 656,000 $ 992,000 $ 496,000 Budgeted Cost of Goods Sold 213,240 X 420,360 X 137,640 X $ 442,760 X $ 571,640 $ 358,360 X Budgeted Gross Margin Budgeted Selling and Administrative Expenses 160,720 201,040 141,520 Budgeted Net Operating Income $ 282,040 X $ 370,600 $ 216,840