Chapter 18, Problem 1P

Summary Introduction

Percent of Sales Method: Percent of sales method is the method which is used to forecast the financial statements. The forecast is made assuming that costs, working capital, and total assets will remain a fixed percent of sales as sales will grow. An income statement is prepared which explains the earnings of the firm and based on this statement hypothetical assumption is made and on these assumptions a balance sheet showing the forecasted items is prepared.

To determine:

Next year’s cost of goods sold.