John Is Creating Next Year's Budget for PDC Ltd

question 81

Multiple Choice

John is creating next year's budget for PDC Ltd. He estimates that next year's sales volume will be 5% higher than this year and that the selling price per unit will remain at $75 per unit. He estimates that cost of goods sold will be $40 per unit, based on a purchase agreement the company has signed with its supplier. The company has done business with the supplier for many years. In creating the budget, which of the following tasks is most likely to be open-ended?

• A) Calculating budgeted sales volume
• B) Determining that sales volume will grow by 5%
• C) Calculating budgeted cost of goods sold
• D) Determining that cost of goods sold per unit will be $75 per unit

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Definitions:

Business Organization

A structured entity formed for the purpose of conducting commercial, industrial, or professional activities, with structures ranging from sole proprietorships to corporations.

Triple Bottom Line

A framework or theory that recommends companies commit to focus on social and environmental concerns just as they do on profits, encapsulating three Ps: profit, people, and planet.

Corporate Form

A legal structure for organizing a business as a separate legal entity, which can own property, enter into contracts, sue and be sued, distinct from its owners (shareholders).

Sole Proprietorships

Sole proprietorships are businesses owned and operated by one person, where there is no legal distinction between the owner and the business entity.