Citrus Girl Company (CGC) purchases quality citrus produce from local growers an
ID: 2513364 • Letter: C
Question
Citrus Girl Company (CGC) purchases quality citrus produce from local growers and sells the produce via the Internet across the United States. To keep costs down, CGC maintains a warehouse, but no showroom or retail sales outlets. CGC has the following information for the second quarter of the year 1. Expected monthly sales for April, May, June, and July are $200,000, $170,000, $290,000, and $70,000, respectively. 2. Cost of goods sold is 40 percent of expected sales. 3. CGC's desired ending inventory is 25 percent of the following month's cost of goods sold. 4. Monthly operating expenses are estimated to be: Salaries: $31,000 Delivery expense: 6 percent of monthly sales Rent expense on the warehouse: $3,500 Utilities: $700 Insurance: $150 Other expenses: $250 Required: 1. Compute the budgeted cost of purchases for each month in the second quarter. April May June Total cost of budgeted purchases 2. Complete the budgeted income statement for each month in the second quarter. CITRUS GIRL COMPANY Budgeted Income Statement For the Month Ending April 30 May 31 June 30 Budgeted Gross Margin Budgeted Net Operating IncomeExplanation / Answer
1 Calculation of Budgeted Cost of Purchases April May June July a.Sales 200000 170000 290000 70000 b.Cost of Goods sold(Sales * 40%) 80000 68000 116000 28000 c,Closing Inventory(25% of Next Month Cost of goods sold) 17000 29000 7000 d.Opening Inventory 20000 17000 29000 e.Budgeted Purchases 77000 80000 94000 Cost of Goods Sold = Opening Stock + Purchases - Closing Stock Then Purchases = Cost of Goods sold - Opening Stock + Closing Stock Opening stock for April is Closing Stock of March which is nothing but 25 % of Cost of goods sold of April 2 Budgeted Income Statement April May June A.Sales 200000 170000 290000 Less B.Cost of Goods Sold 80000 68000 116000 C.Budgeted Gross Margin(A-B) 120000 102000 174000 Less - Operating Expenses Salaries 31000 31000 31000 Delivery Expenses (Sales * 0.06) 12000 10200 17400 Rent 3500 3500 3500 Utilities 700 700 700 Insurance 150 150 150 Other Expenses 250 250 250 Budgeted Net Operating Income 72400 56200 121000