Question

Citrus Girl Company (CGC) purchases quality citrus produce from local growers and sells the produce via...

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:

Expected monthly sales for April, May, June, and July are $280,000, $250,000, $370,000, and $150,000, respectively.

Cost of goods sold is 30 percent of expected sales.

CGC’s desired ending inventory is 25 percent of the following month’s cost of goods sold.

Monthly operating expenses are estimated to be:

Salaries: $36,000

Delivery expense: 5 percent of monthly sales

Rent expense on the warehouse: $7,500

Utilities: $1,500

Insurance: $150

Other expenses: $250

Required:
1.
Compute the budgeted cost of purchases for each month in the second quarter.



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

Homework Answers

Answer #1

Budgeted cost of purchase

April May June
Cost of goods sold 84000 75000 111000
Add: Desired ending inventory 18750 27750 11250
Total needs 102750 102750 122250
Less: Beginning inventory -21000 -18750 -27750
Budgeted purchase 81750 84000 94500

Budgeted income statement

April May June
Sales 280000 250000 370000
Cost of goods sold 84000 75000 111000
Gross profit 196000 175000 259000
Operating expense
Salaries 36000 36000 36000
Delivery expense 14000 12500 18500
Rent 7500 7500 7500
Utilities 1500 1500 1500
Insurance 150 150 150
Other expense 250 250 250
Total operating expense 59400 57900 63900
Operating income 136600 117100 195100
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