Citrus Girl Company (CGC) purchases quality citrus produce from local growers an
ID: 2561699 • 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 $300,000, $270,000, $390,000, and $170,000, respectively.
Cost of goods sold is 45 percent of expected sales.
CGC’s desired ending inventory is 35 percent of the following month’s cost of goods sold.
Monthly operating expenses are estimated to be:
Salaries: $38,000
Delivery expense: 7 percent of monthly sales
Rent expense on the warehouse: $8,500
Utilities: $1,700
Insurance: $210
Other expenses: $310
PLEASE EXPLAIN
CITRUS GIRL COMPANY Budgeted Income Statement For the Month Ending April 30 May 31 June 30 Budgeted Contribution Margin Budgeted Cost of Goods Sold Budgeted Interest Expense Budgeted Sales Returns and Allowances Budgeted Sales Revenue Budgeted Net Operating IncomeExplanation / Answer
Answer a Purchase Budget For the Month Ending Apr May June Total Sales 300,000 270,000 390,000 960,000 Cost of Goods Sold - 45% 135,000 121,500 175,500 432,000 Add: Closing Inventory - 35% 42,525 61,425 26,775 26,775 Total Needs 177,525 182,925 202,275 458,775 Less: opening Inventory - 35% (47,250) (42,525) (61,425) (47,250) Total Cost of Purchases 130,275 140,400 140,850 411,525 Assuming, Beginning Inventory - April - $135,000 X 35% = $47,250 Answer b. Option 1 Budgeted Income Statement For the Month Ending Apr May June Total Sales 300,000 270,000 390,000 960,000 Less: Cost of Goods Sold - 45% 135,000 121,500 175,500 432,000 Gross Margin 165,000 148,500 214,500 528,000 Less: Operating Expenses Salaries 38,000 38,000 38,000 114,000 Delivery Expenses - 7% 21,000 18,900 27,300 67,200 Rent Expenses 8,500 8,500 8,500 25,500 Insurance 210 210 210 630 Other Expenses 310 310 310 930 Total Operating Expenses 68,020 65,920 74,320 208,260 Net Operating Income 96,980 82,580 140,180 319,740 Option 2. Budgeted Income Statement For the Month Ending Apr May June Total Sales 300,000 270,000 390,000 960,000 Less: Cost of Goods Sold: Beginning Inventory 47,250 42,525 61,425 47,250 Add: Purchases During the Period 130,275 140,400 140,850 411,525 Less: Ending Balance 42,525 61,425 26,775 26,775 Cost of Goods Sold 135,000 121,500 175,500 432,000 Gross Margin 165,000 148,500 214,500 528,000 Less: Operating Expenses Salaries 38,000 38,000 38,000 114,000 Delivery Expenses - 7% 21,000 18,900 27,300 67,200 Rent Expenses 8,500 8,500 8,500 25,500 Insurance 210 210 210 630 Other Expenses 310 310 310 930 Total Operating Expenses 68,020 65,920 74,320 208,260 Net Operating Income 96,980 82,580 140,180 319,740