Question

Violet Sales Corp, reports the year-end information from 2020 as follows: Sales (35,000 units) $280,000 Cost of goods sold (105,000) Gross margin $175,000 Operating expenses (155,000) Operating income $20,000 Violet is developing the 2020 budget. In 2020 the company would like to increase selling prices by 5.5%, and as a result expects a decrease in sales volume of 15%. All other operating expenses are expected to remain constant. Assume that cost of goods sold is a variable cost and that operating expenses are a fixed cost. What is budgeted cost of goods sold for 2020

Answer 1

COGS= $89,250

Step-by-step explanation:

Giving the following information:

First, we need to calculate the unitary cost of goods sold:

Unitary COGS= 105,000 / 35,000= $3

Now, the new number of units sold:

Units sold= 35,000*0.85= 29,750

Finally, the COGS for 2020:

COGS= 29,750*3

COGS= $89,250