Citrus Girl Company (CGC) purchases quality citrus produce from local growers an
ID: 2514501 • 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 $180,000, $150,000, $270,000, and $50,000, respectively. 2. Cost of goods sold is 45 percent of expected sales. 3. CGC's desired ending inventory is 55 percent of the following month's cost of goods sold. 4. Monthly operating expenses are estimated to be: . Salaries: $33,000 Delivery expense: 8 percent of monthly sales Rent expense on the warehouse: $2,500 . Utilities: $500 Insurance: $330 Other expenses: $430 Required: 1. Compute the budgeted cost of purchases for each month in the second quarter. April May June Total cost of budgeted purchasesExplanation / Answer
Requirement 1 Purchases budget April May June Expected Sales 1,80,000 1,50,000 2,70,000 Cost of goods sold 81,000 67,500 1,21,500 (180,000X45%) (150,000X45%) (270,000X45%) Add: Ending Inventory 37,125 66,825 12,375 (67,500X55%) (121,500X55%) (50,000X45%X55%) Required Inventory 1,18,125 1,34,325 1,33,875 Less: Beginning Inventory 44,550 37,125 66,825 (81000X55%) (67,500X55%) (121,500X55%) Total cost of budgeted purchases 73,575 97,200 67,050 Requirement 2 CITRUS GIRL COMPANY Budgeted Income Statement For the Month Ending April 30 May 31 June 30 Budgeted Sales revenue 1,80,000 1,50,000 2,70,000 Budgeted cost of goods sold 81,000 67,500 1,21,500 Budgeted Gross Margin 99,000 82,500 1,48,500 Selling and admistrative expenses 36760 36760 36760 Delivery Expenses @8% 14400 12000 21600 (180000X8%) (150000X8%) (270000X8%) Budgeted Net Operating income 47,840 33,740 90,140