Question

Motors is a chain of car dealerships. Sales in the fourth quarter of last year were $4,600,000. Suppose management projects that its current​ year's quarterly sales will increase by 3​% in quarter​ 1, by another 7​% in quarter​ 2, by another 5​% in quarter​ 3, and by another 4​% in quarter 4. Management expects cost of goods sold to be 45​% of revenues every​ quarter, while operating expenses should be 30​% of revenues during each of the first two​ quarters, 25​% of revenues during the third​ quarter, and 20​% during the fourth quarter.Required:a. Prepare a budgeted income statement for each of the four quarters and for the entire year.b. Prepare the first portion of the budgeted income statement through gross profit, then complete the statement.

Answer 1

Answer:

Budgeted Income Statement for each of the four quarters and for the entire year

Quarter                        1st                    2nd                3rd                  4th

Sales                     $4,738,000    $5,069,660    $5,323,143     $5,536,069

Cost of Sales       ($2,132,100)     ($2,281,347)  ($2,395,414)     ($2,491,231)

Gross Profit          $2,605,900     $2,788,313    $2,927,729     $3,044,838

Operating Costs  ($1,421,400)    ($1,520,898)  ($1,330,786)      ($1,107,214)

Operating Profit    $1,184,500      $1,267,415     $1,596,943      $1,937,624

Explanation:

Pay attention to the calculation of the following amounts :

1. Sales - These are based on increments per quarter
2. Cost of Sales - The Cost for quarter is at 45% of Revenue
3. Operating Costs - Based on Sales amounts ( 30 % in the first two quarters , 25% in third and 20% in the 4th quarter.)