Concept explainers
Percent of Sales Method: Percent of sales method is the method which is used to
To determine:
Next year’s cost of goods sold.
Explanation of Solution
Given,
Amount of sales in the current year is $100,000.
Cost of goods sold is $72,000.
Forecasted amount of sales for the next year is $110,000.
The formula to calculate the cost of goods sold for the next year is,
Substitute $110,000 as the forecasted sales and 72% as the cost of goods sold as percent of current sales. (refer working note 1).
The cost of goods sold for the next year is $79,200.
Working note:
Calculation of cost of goods sold as the percentage of current sales.
The formula to calculate the cost of goods sold as a percentage of current sales is,
Substitute $72,000 for cost of goods sold and $100,000 for current sales.
The cost of goods sold as a percent of current sales is 72%.
Thus, the forecasted amount of goods sold for the next year is $79,200.
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Chapter 18 Solutions
FUND. OF CORPORATE FINANCE W/ACCESS >I