Red Canyon T-shirt Company operates a chain of T-shirt shops in the southwestern United States. The sales manager has provided a sales forecast for the coming year, along with the following information:

€¢ Each T-shirt is expected to sell for $15.
€¢ The purchasing manager buys the T-shirts for $6 each.
€¢ The company needs to have enough T-shirts on hand at the end of each quarter to fill
25 percent of the next quarter€™s sales demand.
€¢ Selling and administrative expenses are budgeted at $80,000 per quarter plus 10 percent of total sales revenue.

Required:
Prepare the following operating budgets for quarters 1, 2, and 3.
1. Sales budget.
2. Merchandise purchases budget.
3. Cost of goods sold budget.
4. Selling and administrative expense budget.
5. Budgeted incomestatement.

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Quarter 1 Quarter 2 Quarter 3 Quarter 4 Budgeted unit sales 40,000 60,000 30,000 60,000