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.

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Answer 1

Question

Definition Definition Financial statement that provides a snapshot of an organization's financial position at a specific point in time. It summarizes a company's assets, liabilities, and shareholder's equity, detailing what the company owns, what it owes, and what is left over for its owners. The balance sheet serves as a crucial tool to assess the financial health and stability of a company, as well as to help management make informed decisions about its future investments and financial obligations.

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.

Expert Solution & Answer

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,

Fundamentals of Corporate Finance, Student Value Edition, Chapter 18, Problem 1P , additional homework tip 1

Substitute $110,000 as the forecasted sales and 72% as the cost of goods sold as percent of current sales. (refer working note 1).

Fundamentals of Corporate Finance, Student Value Edition, Chapter 18, Problem 1P , additional homework tip 2

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,

Fundamentals of Corporate Finance, Student Value Edition, Chapter 18, Problem 1P , additional homework tip 3

Substitute $72,000 for cost of goods sold and $100,000 for current sales.

Fundamentals of Corporate Finance, Student Value Edition, Chapter 18, Problem 1P , additional homework tip 4

The cost of goods sold as a percent of current sales is 72%.

Conclusion

Thus, the forecasted amount of goods sold for the next year is $79,200.

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Students have asked these similar questions

Pam and Jim are saving money for their two children who they plan to send to university.The eldest child will enter university in 5 years while the younger will enter in 7 years. Each child is expected spend four years at university. University fees are currently R20 000 per year and are expected to grow at 5% per year. These fees are paid at the beginning of each year.Pam and Jim currently have R40 000 in their savings and their plan is to save a fixed amount each year for the next 5 years. The first deposit taking place at the end of the current year and the last deposit at the date the first university fees are paid.Pam and Jim expect to earn 10% per year on their investments.What amount should they invest each year to meet the cost of their children’s university fees?

You make a loan of R100 000, with annual payments being made at the end of each year for the next 5 years at a 10% interest rate. How much interest is paid in the second year?

Answer 2

Question

Definition Definition Financial statement that provides a snapshot of an organization's financial position at a specific point in time. It summarizes a company's assets, liabilities, and shareholder's equity, detailing what the company owns, what it owes, and what is left over for its owners. The balance sheet serves as a crucial tool to assess the financial health and stability of a company, as well as to help management make informed decisions about its future investments and financial obligations.

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.

Expert Solution & Answer

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,

Fundamentals of Corporate Finance, Student Value Edition, Chapter 18, Problem 1P , additional homework tip 1

Substitute $110,000 as the forecasted sales and 72% as the cost of goods sold as percent of current sales. (refer working note 1).

Fundamentals of Corporate Finance, Student Value Edition, Chapter 18, Problem 1P , additional homework tip 2

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,

Fundamentals of Corporate Finance, Student Value Edition, Chapter 18, Problem 1P , additional homework tip 3

Substitute $72,000 for cost of goods sold and $100,000 for current sales.

Fundamentals of Corporate Finance, Student Value Edition, Chapter 18, Problem 1P , additional homework tip 4

The cost of goods sold as a percent of current sales is 72%.

Conclusion

Thus, the forecasted amount of goods sold for the next year is $79,200.

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Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 3

Question

Definition Definition Financial statement that provides a snapshot of an organization's financial position at a specific point in time. It summarizes a company's assets, liabilities, and shareholder's equity, detailing what the company owns, what it owes, and what is left over for its owners. The balance sheet serves as a crucial tool to assess the financial health and stability of a company, as well as to help management make informed decisions about its future investments and financial obligations.

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.

Expert Solution & Answer

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,

Fundamentals of Corporate Finance, Student Value Edition, Chapter 18, Problem 1P , additional homework tip 1

Substitute $110,000 as the forecasted sales and 72% as the cost of goods sold as percent of current sales. (refer working note 1).

Fundamentals of Corporate Finance, Student Value Edition, Chapter 18, Problem 1P , additional homework tip 2

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,

Fundamentals of Corporate Finance, Student Value Edition, Chapter 18, Problem 1P , additional homework tip 3

Substitute $72,000 for cost of goods sold and $100,000 for current sales.

Fundamentals of Corporate Finance, Student Value Edition, Chapter 18, Problem 1P , additional homework tip 4

The cost of goods sold as a percent of current sales is 72%.

Conclusion

Thus, the forecasted amount of goods sold for the next year is $79,200.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 4

Question

Definition Definition Financial statement that provides a snapshot of an organization's financial position at a specific point in time. It summarizes a company's assets, liabilities, and shareholder's equity, detailing what the company owns, what it owes, and what is left over for its owners. The balance sheet serves as a crucial tool to assess the financial health and stability of a company, as well as to help management make informed decisions about its future investments and financial obligations.

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.

Expert Solution & Answer

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,

Fundamentals of Corporate Finance, Student Value Edition, Chapter 18, Problem 1P , additional homework tip 1

Substitute $110,000 as the forecasted sales and 72% as the cost of goods sold as percent of current sales. (refer working note 1).

Fundamentals of Corporate Finance, Student Value Edition, Chapter 18, Problem 1P , additional homework tip 2

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,

Fundamentals of Corporate Finance, Student Value Edition, Chapter 18, Problem 1P , additional homework tip 3

Substitute $72,000 for cost of goods sold and $100,000 for current sales.

Fundamentals of Corporate Finance, Student Value Edition, Chapter 18, Problem 1P , additional homework tip 4

The cost of goods sold as a percent of current sales is 72%.

Conclusion

Thus, the forecasted amount of goods sold for the next year is $79,200.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 5

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.

Expert Solution & Answer

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,

Fundamentals of Corporate Finance, Student Value Edition, Chapter 18, Problem 1P , additional homework tip 1

Substitute $110,000 as the forecasted sales and 72% as the cost of goods sold as percent of current sales. (refer working note 1).

Fundamentals of Corporate Finance, Student Value Edition, Chapter 18, Problem 1P , additional homework tip 2

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,

Fundamentals of Corporate Finance, Student Value Edition, Chapter 18, Problem 1P , additional homework tip 3

Substitute $72,000 for cost of goods sold and $100,000 for current sales.

Fundamentals of Corporate Finance, Student Value Edition, Chapter 18, Problem 1P , additional homework tip 4

The cost of goods sold as a percent of current sales is 72%.

Conclusion

Thus, the forecasted amount of goods sold for the next year is $79,200.

Answer 6

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.

Expert Solution & Answer

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,

Fundamentals of Corporate Finance, Student Value Edition, Chapter 18, Problem 1P , additional homework tip 1

Substitute $110,000 as the forecasted sales and 72% as the cost of goods sold as percent of current sales. (refer working note 1).

Fundamentals of Corporate Finance, Student Value Edition, Chapter 18, Problem 1P , additional homework tip 2

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,

Fundamentals of Corporate Finance, Student Value Edition, Chapter 18, Problem 1P , additional homework tip 3

Substitute $72,000 for cost of goods sold and $100,000 for current sales.

Fundamentals of Corporate Finance, Student Value Edition, Chapter 18, Problem 1P , additional homework tip 4

The cost of goods sold as a percent of current sales is 72%.

Conclusion

Thus, the forecasted amount of goods sold for the next year is $79,200.

Answer 7

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.

Answer 8

Expert Solution & Answer

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,

Fundamentals of Corporate Finance, Student Value Edition, Chapter 18, Problem 1P , additional homework tip 1

Substitute $110,000 as the forecasted sales and 72% as the cost of goods sold as percent of current sales. (refer working note 1).

Fundamentals of Corporate Finance, Student Value Edition, Chapter 18, Problem 1P , additional homework tip 2

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,

Fundamentals of Corporate Finance, Student Value Edition, Chapter 18, Problem 1P , additional homework tip 3

Substitute $72,000 for cost of goods sold and $100,000 for current sales.

Fundamentals of Corporate Finance, Student Value Edition, Chapter 18, Problem 1P , additional homework tip 4

The cost of goods sold as a percent of current sales is 72%.

Answer 9

Expert Solution & Answer

Answer 10

Expert Solution & Answer

Answer 11

Conclusion

Thus, the forecasted amount of goods sold for the next year is $79,200.

Answer 12

Ch. 18 - Prob. 1P Ch. 18 - Prob. 2P Ch. 18 - Prob. 3P Ch. 18 - Income Statement Balance...Ch. 18 - Income Statement Balance...Ch. 18 - Income Statement Balance...Ch. 18 - Income Statement Balance...Ch. 18 - Prob. 8P Ch. 18 - Prob. 9P Ch. 18 - Prob. 10P

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