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:

• Each T-shirt is expected to sell for $23.
• The purchasing manager buys the T-shirts for $9 each.
• The company needs to have enough T-shirts on hand at the end of each quarter to fill 33 percent of the next quarters sales demand.
• Selling and administrative expenses are budgeted at $96,000 per quarter plus 12 percent of total sales revenue.

5. Complete the budgeted income statement for quarters 1, 2, and 3.

Quarter 2 76,000 Quarter 3 38,000 Quarter 4 76,000 Quarter 1 Budgeted unit sales 48,000 RED CANYON T-SHIRT COMPANY Budgeted Income Statement Quarter 1 Quarter 2 Quarter 3 Budgeted Gross Margin Budgeted Net Operating Income