7 Poukou Products, a wholesaler fishing equipment, budgeted the following sales for the indicated months
June 20X8 July 20X8 August 20X8
Sales on account $1,850,000 1,960,000 2,100,000
Cash Sales $280,000 240,000 260,000
Total Sales $2,100,000 $2,200,000 $2,360,000
All merchandise is marked up to sell at its invoice cost plus 25%. Target merchandise inventories at the beginning of each month are 30% of that month's projected cost of goods sold.
1. Compute the budgeted cost of goods sold for the month of June 20X8.
2. Compute the budgeted merchandise purchases for July 20X8.
9-38 Dixie's BBQ is a restaurant in downtown Duluth. Dixie expanded to a second location in Superior, Wisconsin three years ago. Recently, Dixie decided to retire from active management of the individual restaurants but continued to oversee the entire company. She hired a manager for each restaurant. In 20X3, each restaurant had sales of $850,000. The Superior restaurant is still pricing lower than the Duluth restaurant to establish a customer base. Variable expenses run 60% of sales for the Duluth restaurant and 70% of sales for the Superior restaurant.
Each manager is responsible for the rent and some other fixed costs for his or her restaurant. These costs amounted to $125,000 for the Duluth restaurant and $50,000 for the one in Superior. The difference is primarily due to the lower rent in Superior. In addition, several costs, such as advertising, legal services, accounting, and personnel services, were centralized. The managers had no control of these expenses, but some of them directly benefited the individual restaurants. Of the $360,000 cost in this category, $110,000 related to the Duluth restaurant and $180,000 to the Superior restaurant, where most of the additional cost in Superior is due to the cost of extra advertising to build up its customer base. The remaining $70,000 was general corporate overhead.
1. Prepare income statements for each restaurant and for the company as a whole. Use a format that allows easy assessment of each manager's performance and each restaurant's economic performance.
2. Using only the information given in this exercise:
a. Evaluate each restaurant as an economic investment.
b. Evaluate each manager.
Poukou budgeted CGS and purchases are examined.