Statement 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:

1. Expected monthly sales for April, May, June, and July are $220,000, $190,000, $310,000, and $90,000, respectively.

2. Cost of goods sold is 30 percent of expected sales.

3. CGC’s desired ending inventory is 20 percent of the following month’s cost of goods sold.

4. Monthly operating expenses are estimated to be:

• Salaries: $30,000

• Delivery expense: 4 percent of monthly sales

• Rent expense on the warehouse: $4,500

• Utilities: $800

• Insurance: $175

• Other expenses: $260

Required:

1. Prepare the merchandise purchases budget for each month in the second quarter.

2. Prepare a budgeted income statement for each month in the second quarter.