The budget committee of Greta Fashions, an upscale women's clothing retailer, has assembled the following data. As the business manager, you must prepare the budgeted income statements for May and June.

a. Sales in April were $60,000. You forecast that monthly sales will increase 10% in May and 5% in June.

b. Greta Fashions maintains inventory of $10,000 plus 10% of sales revenues budgeted for the following month. Monthly purchases average 50% of sales revenues in that same month. Actual inventory on April 30 is $16,600. Sales budgeted for July are $70,000.

c. Monthly salaries amount to $7,000. Sales commissions equal 5% of sales for that month. Combine salaries and commissions into a single figure.

d. Other monthly expenses are as follows:

Rent expense ................................................................. $3,000, paid as incurred

Depreciation expense .................................................................................. $ 300

Insurance expense ...................................... $ 200, expiration of prepaid amount

Income tax ................................................................... 20% of operating income

Requirement

Prepare Greta Fashions' budgeted income statements for May and June. Show cost of goods sold computations.