Reference no: EM133123491

Question - The budget committee of Litwin Company collects the following data for its San Miguel Store in preparing budgeted income statements for May and June 20X1.

1. Sales for May are expected to be $800,000. Sales in June and July are expected to be 5% higher than the preceding month.

2. Cost of goods sold is expected to be 75% of sales.

3. Company policy is to maintain ending merchandise inventory at 15% of the following month's cost of goods sold.

4. Operating expenses are estimated to be:

Sales salaries $30,000 per month

Advertising 6% of monthly sales

Delivery expense 3% of monthly sales

Sales commissions 5% of monthly sales

Rent expense $5,000 per month

Depreciation $800 per month

Utilities $600 per month

Insurance $500 per month

5. Income taxes are estimated to be 30% of income from operations.

Required -

(a) Prepare the merchandise purchases budget for each month in columnar form.

(b) Prepare budgeted income statements for each month in columnar form.