Your company has sales of 

​$104 comma 600104,600 

this year and cost of goods sold of 

​$65 comma 30065,300. 

You forecast sales to increase to 

$ 115 comma 400$115,400 

next year. Using the percent of sales​ method, forecast next​ year's cost of goods sold.

The Tax Cuts and Jobs Act of 2017 temporarily allowed​ 100% bonus depreciation​ (effectively expensing capital​ expenditures). However, we will still include depreciation forecasting in this chapter and in these problems.

Question content area bottom

Part 1

The forecasted cost of goods sold​ (COGS) is 

​$72,01472,014. 

 ​(Round to the nearest​ dollar.)

To solve this problem using the percent of sales method, we will follow these steps:

### Step 1: Calculate the percentage of sales represented by the current cost of goods sold (COGS).
We have the current values:
- Sales this year: $104,600
- COGS this year: $65,300

The percentage of sales that the cost of goods sold represents is given by:

\[
\text{COGS \%} = \left( \frac{\text{COGS this year}}{\text{Sales this year}} \right) \times 100
\]

\[
\text{COGS \%} = \left( \frac{65,300}{104,600} \right) \times 100 = 62.41\%
\]

### Step 2: Apply this percentage to forecasted sales.
We know that the forecasted sales for next year are $115,400. We will now use the percentage we calculated to forecast the COGS for next year:

\[
\text{Forecasted COGS} = \text{COGS \%} \times \text{Forecasted Sales}
\]

\[
\text{Forecasted COGS} = 0.6241 \times 115,400 = 72,013.94
\]

### Step 3: Round to the nearest dollar.
The forecasted COGS is approximately **$72,014**.

Thus, the forecasted cost of goods sold (COGS) for next year is **$72,014**.

---
Would you like more details on the process or any further explanation? 

Here are 5 related questions to expand on this topic:
1. How would changes in COGS percentage affect future profitability?
2. What assumptions are made in the percent of sales method?
3. How can a company reduce its COGS while maintaining sales growth?
4. What other methods can be used for forecasting future COGS?
5. How does bonus depreciation under the Tax Cuts and Jobs Act of 2017 affect capital expenditure decisions?

**Tip**: Always review your percentage-based assumptions when projecting financials, as changes in costs or efficiencies can alter the relationship between sales and COGS.

Your company has sales of $104,600 this year and cost of goods sold of $65,300. You forecast sales to increase to $115,400 next year. Using the percent of sales method, forecast next year's cost of goods sold.

Learn how to forecast next year's cost of goods sold (COGS) using the percent of sales method. This example starts with $104,600 in sales and $65,300 in COGS for this year, with a sales forecast of $115,400. Follow a step-by-step solution to calculate the forecasted COGS of $72,014.

Math Problem Statement

Solution

Ask a new question for Free

By Image

Math Problem Analysis

Mathematical Concepts

Formulas

Theorems

Suitable Grade Level

Related Recommendation