Use the "Percent of Sales Method" of Preparing Pro Forma

question 129

Multiple Choice

Use the "percent of sales method" of preparing pro forma financial statements to determine the projection for next year's cost of goods sold.Make the following assumptions: current year's sales are $27,800,000; current year's cost of goods sold is $17,528,000; sales are expected to rise by 30%.What is the projection for next year's cost of goods sold?

• A) $20,481,000
• B) $21,138,900
• C) $21,459,200
• D) $22,786,400

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Definitions:

Gross Profit

The difference between sales revenue and the cost of goods sold, indicating the efficiency of a company in managing its production and labor.

Operating Expenses

Costs associated with running a company's core business activities but not directly tied to production.

Cost Of Goods Sold

The total of all costs used to create a product or service, which has been sold.

Beginning Inventory

The total worth of a company's inventory at the beginning of a financial period.