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 $11.
• The purchasing manager buys the T-shirts for $4 each.
• The company needs to have enough T-shirts on hand at the end of each quarter to fill 21 percent of the next quarters sales demand.
• Selling and administrative expenses are budgeted at $72,000 per quarter plus 10 percent of total sales revenue.

Quarter 1 36,000 Quarter 2 56,000 Quarter 3 28,000 Quarter 4 56,000 Budgeted Unit Sales 1. Determine budgeted sales revenue for each quarter. Quarter 1 Quarter 2 Quarter 3 Budgeted Sales Revenue 2. Determine budgeted cost of merchandise purchased for each quarter. Quarter 1 Quarter 2 Quarter 3 Budgeted Cost of Merchandise Purchased 3. Determine budgeted cost of good sold for each quarter. Quarter 1 Quarter 2 Quarter 3 Budgeted Cost of Goods Sold 4. Determine selling and administrative expenses for each quarter. Quarter 1 Quarter 2 Quarter 3 Budgeted Selling and Administrative Expense:s 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