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	40,000	60,000	30,000	60,000

• Each T-shirt is expected to sell for $15.
• 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 25 percent of the next quarters sales demand.
• Selling and administrative expenses are budgeted at $80,000 per quarter plus 10 percent of total sales revenue.

Required:

1. Determine budgeted sales revenue for each quarter. budgeted sales revenue for Quarter 1, Quarter 2, Quarter 3 2. Determine budgeted cost of merchandise purchased for each quarter. Budgeted Cost of Merchandise for Quarter 1, Quarter 2, Quarter 3 3. Determine budgeted cost of good sold for each quarter. Budgeted Cost of Goods Sold for Q1,Q2,Q3 4. Determine selling and administrative expenses for each quarter. Budgeted Selling and administrative Expenses for Q1, Q2, Q3 5. Complete the budgeted income statement for each quarter.

RED CANYON T-SHIRT COMPANY

BUDGETED INCOME STATEMENT

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Budgeted Gross Margin

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Budgeted Net Operating Income