Citrus Girl Company (CGC) purchases quality citrus produce from local growers an
ID: 2538966 • 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:
Expected monthly sales for April, May, June, and July are $210,000, $180,000, $300,000, and $80,000, respectively.
Cost of goods sold is 40 percent of expected sales.
CGC’s desired ending inventory is 50 percent of the following month’s cost of goods sold.
Monthly operating expenses are estimated to be:
Salaries: $30,000
Delivery expense: 5 percent of monthly sales
Rent expense on the warehouse: $4,000
Utilities: $800
Insurance: $300
Other expenses: $400
Required:
1. Compute the budgeted cost of purchases for each month in the second quarter.
2. Complete the budgeted income statement for each month in the second quarter.
Explanation / Answer
1. Calculation of budgeted cost of purchase for each month in the second quarter -
Note -(a). opening of april is computed as 50% of april COGS because march closing should be on the same pattern 50% of COGS of following month.
(b) purchase would be computed as closing + COGS - opening = purchase.
2. Computation of budgeted income for the second quarter -
Please comment in case of any clarification required.
April May June sales 210000 180000 300000 COGS (40% of sales) 84000 72000 120000 opening 42000 36000 60000 purchase 78000 96000 76000 closing 36000 60000 16000 COGS 84000 72000 120000