Question: The budget committee of Deaeon company collects the following data for its San Miguel Store in prepraring budgeted income sttements for May and June 2009.
1) Sales for May are expected to be $800,000. Sales in June and July are expected to be 10% higher than the proceding month.
2) Cost of goodssold is expected to be 75% of sales
3) Company policy is to maintain ending merchandise inventory at 20% of the following month's cost of goods sold
4) Operating expenses are estimated to be:
| sales salaries |
$30,000 per month |
| advertising |
5% of monthly sales |
| deilvery expense |
3% of monthly sales |
| sales commissions |
4% of monthly sales |
| rent expense |
5,000 per month |
| depreciation |
$800 per month |
| utilities |
|
$600 per month |
| insurance |
|
$500 per month |
5) Income taxes are estimated to be 30% of income from operations
Instructions:
a) Prepare the merchandise purchases budget for each month in columnar form
b) Prepare budgeted income statements for each month in columnar form. Show in the statements the details of cost of goods sold.