Question

payton inc. reports in its year 7 annual report, sales of $9,816 million and cost of goods sold of $3,926 million. for next year, you project that sales will grow by 3% and that cost of goods sold percentage will be 1 percentage point higher. projected cost of goods sold for year 8 will be: select one: a. there is not enough information to determine the amount. b. $4,145 million c. $3,926 million d. $4,024 million e. $4,044 million

Answer 1

Using a 3% growth in sales and a 1 percentage point increase in COGS percentage, the projected COGS for Payton Inc. for Year 8 is approximately $4,145 million.

Step-by-step explanation:

The question relates to projecting the cost of goods sold (COGS) for Payton Inc. for Year 8 based on given historical financial data and growth assumptions. In Year 7, Payton Inc. reported sales of $9,816 million and COGS of $3,926 million. For Year 8, it is projected that sales will grow by 3%, and the COGS percentage will increase by 1 percentage point.

To calculate the projected COGS for Year 8, first compute the increased sales figure: $9,816 million × 1.03 = $10,111.48 million. Then, calculate the increased COGS percentage. If the COGS was $3,926 million out of $9,816 million in sales, that is a percentage of ($3,926/$9,816) × 100, which is approximately 40%. If this percentage increases by 1 percentage point, the new COGS percentage would be 41%. Applying this to the projected sales for Year 8 gives us the projected COGS: $10,111.48 million × 0.41 = $4,145.71 million. Since the options provided are in whole millions, it would be rounded to $4,145 million (Option B).