Question - The budget committee of Suppar Company collects for the following data for its San Miguel store in preparing budgeted income statement for May and June 2017
1. Sales for May are expected to be $800,000. Sales in June and July are expected to be 5 % higher than the preceding month
2. Cost of goods sold is expected to be 75% of sales
3. Company policy is to maintain ending merchandise inventory at 10% of the following month's cost of goods sold.
4. Operating expenses are estimated to be as follows:
Sales salaries $35,000 per month
Advertising 6% of monthly sales
Delivery expense 2% of monthly sales
Sales commissions 5% of monthly sales
Rent expense $5,000 per month
Depreciation $800 per month
Utilities $600 per month
Insurance $ 500 per month
5. Interest expense is $2,000 per month. Income taxes are estimated to be 30% of income before income taxes.
Instructions -
(a) Prepare for merchandise purchases budget for each month in columnar form.
(b) Prepare budgeted multiple step income statement for each month in columnar form show in the statement the details of cost of goods sold.