Q1) Terry's Equipment Center has been organized to sell line of lawn and garden equipments. Company start operations on January 1 with the following assets.
Cash - $14,000
Inventory - 29,000
Land - 31,000
Buildings and equipments - $250,000
(Useful life 20 years, no residual value, of which $210,000 relates to selling and $40,000 to general and administrative activities)
Sales for January, February, and March (that is, first quarter) are expected to $140,000; they are expected to be $280,000 for next three months, and $325,000 three months after that. Certain expenses are expected to differ with sales as follows:
| |
Percent of Sales Dollars |
| Cost of goods sold |
60 |
| Bad debts |
2 |
| Variable selling expenses |
14 |
| Variable administrative expenses |
5 |
Other expenses not expected to differ with sales:
| Selling |
$25,000 per quarter |
| Administrative |
18,550 per quarter |
| Depreciation |
3,125 per quarter |
problem:
Make operating budget for first and second quarters of operations of Terry's Equipment Center.