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 1Quarter 2Quarter 3Quarter 4Budgeted unit sales34,00054,00027,00054,000 Each T-shirt is expected to sell for $18.The purchasing manager buys the T-shirts for $7 each.The company needs to have enough T-shirts on hand at the end of each quarter to fill 28 percent of the next quarter’s sales demand.Selling and administrative expenses are budgeted at $68,000 per quarter plus 14 percent of total sales revenue.Required:. Determine budgeted cost of merchandise purchased for quarters 1, 2, and 3.. Determine budgeted cost of good sold for quarters 1, 2, and 3.. Determine selling and administrative expenses for quarters 1, 2, and 3.. Complete the budgeted income statement for quarters 1, 2, and 3.

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Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter3: Cost-volume-profit Analysis

Section: Chapter Questions

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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	34,000	54,000	27,000	54,000

Each T-shirt is expected to sell for $18.
The purchasing manager buys the T-shirts for $7 each.
The company needs to have enough T-shirts on hand at the end of each quarter to fill 28 percent of the next quarter’s sales demand.
Selling and administrative expenses are budgeted at $68,000 per quarter plus 14 percent of total sales revenue.

Required:
. Determine budgeted cost of merchandise purchased for quarters 1, 2, and 3.
. Determine budgeted cost of good sold for quarters 1, 2, and 3.
. Determine selling and administrative expenses for quarters 1, 2, and 3.
. Complete the budgeted income statement for quarters 1, 2, and 3.

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