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	45,000	70,000	35,000	70,000

• 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 $90,000 per quarter plus 18 percent of total sales revenue.

Quarter 1 Quarter 2 Quarter 3 Budgeted Cost of Merchandise 8 $ Purchased 8 $ 8 $ 3. Determine budgeted cost of good sold for each quarter. Budgeted Cost of Goods Sold Quarter 1 Quarter 2 Quarter 3 $ 420,000 $476,000 $364,000 4. Determine selling and administrative expenses for each quarter. Quarter 1 Quarter 2 Quarter 3 Budgeted Selling and Administrative Expenses 5. Complete the budgeted income statement for each quarter. RED CANYON T-SHIRT COMPANY Budgeted Income Statement Quarter 1 Quarter 2 Quarter 3 Budgeted Gross Margin Budgeted Net Operating Income