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Question: Blue Skies T-shirt Company operates a

Blue Skies T-shirt Company operates a chain of T-shirt shops in the northeastern United States. The sales manager has provided a sales forecast for the coming year, along with the following information:
Blue Skies T-shirt Company operates a chain of T-shirt shops in the northeastern 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 $20.
∙ The purchasing manager buys the T-shirts for $8 each.
∙ The company needs to have enough T-shirts on hand at the end of each quarter to fill 30 percent of the next quarter’s sales demand.
∙ Selling and administrative expenses are budgeted at $60,000 per quarter plus 15 percent of total sales revenue.
Required:
Prepare the following operating budgets for quarters 1, 2, and 3. (You do not have enough information to complete quarter 4.)
1. Sales budget.
2. Merchandise purchases budget.
3. Cost of goods sold budget.
4. Selling and administrative expense budget.
5. Budgeted income statement.

∙ Each T-shirt is expected to sell for $20. ∙ The purchasing manager buys the T-shirts for $8 each. ∙ The company needs to have enough T-shirts on hand at the end of each quarter to fill 30 percent of the next quarter’s sales demand. ∙ Selling and administrative expenses are budgeted at $60,000 per quarter plus 15 percent of total sales revenue. Required: Prepare the following operating budgets for quarters 1, 2, and 3. (You do not have enough information to complete quarter 4.) 1. Sales budget. 2. Merchandise purchases budget. 3. Cost of goods sold budget. 4. Selling and administrative expense budget. 5. Budgeted income statement.



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