Advanced Enterprises reports year-end information from 2018 as follows:

Advanced is developing the 2019 budget. In 2019 the company would like to increase selling prices by 12.5%, and as a result expects a decrease in sales volume of 9%. 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 2019?
A) $723,375
B) $585,130
C) $700,870
D) $643,000

Question

Advanced Enterprises reports year-end information from 2018 as follows:

Advanced is developing the 2019 budget. In 2019 the company would like to increase selling prices by 12.5%, and as a result expects a decrease in sales volume of 9%. 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 2019?
A) $723,375 
B) $585,130 
C) $700,870 
D) $643,000

Quizplus · Accepted Answer

Cost of goods sold in 2018 per unit: $643,000/160,750 units = $4 per unit
Number of units sold in 2019 = 160,750 × 0.91 = 146,282.5 units × $4 per unit = $585,130.

Advanced Enterprises Reports Year-End Information from 2018 as Follows