The budget committee of Soventino Fashions, an upscale women's clothing retailer, has assembled the following data. As the business manager, you must prepare the budgeted income statements for May and June.

a. Sales in April were $40,000. You forecast that monthly sales will increase 10% in May and 5% in June.

b. The company maintains inventory of $10,000 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 $13,000. Sales budgeted for July are $70,000.

c. Monthly salaries amount to $5,000. Sales commissions equal 5% of sales for that month. Combine salaries and commissions into a single figure.

d. Other monthly expenses are as follows:

Rent expense .................................................................................... $2,000, paid as incurred

Depreciation expense ..................................................................................................... $ 500

Insurance expense .......................................................... $ 100, expiration of prepaid amount

Income tax ................................................................................... 20% of operating income

Requirement

Prepare Soventino Fashions' budgeted income statements for May and June. Show cost of goods sold computations.