Katie enterprises reports the year-end information from 20x8 as follows: sales (70,000 units) $560,000; cost of goods sold 210,000; gross margin 350,000; operating expenses 200,000; operating income $150,000. katie is developing the 20x2 budget. in 20x2, the company would like to increase selling prices by 4%, and as a result expects a decrease in sales volume of 10%. all other operating expenses are expected to remain constant. assume that cogs is a variable cost and that operating expenses are a fixed cost. what is budgeted cost of goods sold for 20x2?

Question

Business

Ryland Rasmussen

19 February, 19:27

Katie enterprises reports the year-end information from 20x8 as follows: sales (70,000 units) $560,000; cost of goods sold 210,000; gross margin 350,000; operating expenses 200,000; operating income $150,000. katie is developing the 20x2 budget. in 20x2, the company would like to increase selling prices by 4%, and as a result expects a decrease in sales volume of 10%. all other operating expenses are expected to remain constant. assume that cogs is a variable cost and that operating expenses are a fixed cost. what is budgeted cost of goods sold for 20x2?

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Ralph Lewis · Answer 1

The new selling price for the 20x2 budget: (560,000 / 70,000) * (1+0.04)

= $8.32 per unit

The number of units for 20x2 budget: 70000 * (1 - 0.1)

= 63000 units

Cost of goods sold per unit of 20x8 budget: 210,000 : 70,000

= $3 per unit

The cost of goods sold for 20x2 budget = $3 * 63000

= $189,000

Therefore, the cost of goods sold for 20x2 budget is $189,000