The budget committee of Chelsey Fashions, an upscale women's clothing retailer, has assembled the following data. As
Question:
a. Sales in April were $35,000. You forecast that monthly sales will increase 10% in May and an additional 2% in June.
b. The company maintains inventory of $9,000 plus 10% of the sales revenue budgeted for the following month. Monthly purchases average 50% of sales revenue in that same month. Actual inventory on April 30 is $12,850. Sales budgeted for July are $45,000.
c. Monthly salaries amount to $3,000. Sales commissions equal 10% of sales for that month. Combine salaries and commissions into a single figure.
d. Other monthly expenses are as follows:
Rent expense ................................................... $2,800, paid as incurred
Depreciation expense ..................................... $ 700
Insurance expense ........................................... $ 400, expiration of prepaid amount
Income tax ........................................................ 20% of operating income
Requirement
Prepare Chelsey Fashions' budgeted income statements for May and June. Show cost of goods sold computations.
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