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	38,000	58,000	29,000	58,000

• Each T-shirt is expected to sell for $13.
• The purchasing manager buys the T-shirts for $5 each.
• The company needs to have enough T-shirts on hand at the end of each quarter to fill 23 percent of the next quarters sales demand.
• Selling and administrative expenses are budgeted at $76,000 per quarter plus 18 percent of total sales revenue.

Required: 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 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 Sales Revenue
Budgeted Cost of Goods Sold
Budgeted Gross Margin
Budgeted Selling and Administrative Expenses
Budgeted Net Operating Income