Use the information about Billy's Burgers to answer the following question(s):

-Using the percent of sales method,and assuming 20% growth in sales,estimate Billy's Burgers' accounts payable for 2016.
A)$21.0 million
B)$25.2 million
C)$18.0 million
D)$21.6 million
E)$19.5 million

Question

Use the information about Billy's Burgers to answer the following question(s):
 
-Using the percent of sales method,and assuming 20% growth in sales,estimate Billy's Burgers' accounts payable for 2016.
A)$21.0 million 
B)$25.2 million 
C)$18.0 million 
D)$21.6 million 
E)$19.5 million

Quizplus · Accepted Answer

First, we need to calculate Billy's Burgers' 2015 accounts payable based on the information given. 
Accounts payable = 10% of cost of goods sold = 0.1 * $50 million = $5 million

Next, we can use the percent of sales method to estimate Billy's Burgers' accounts payable for 2016. 
Accounts payable = accounts payable in 2015 * (1 + growth rate) 
Accounts payable = $5 million * (1 + 0.20) = $6 million

Therefore, the best choice is (D) $21.6 million, which is the closest option to our estimated accounts payable of $6 million.

Use the Information About Billy's Burgers to Answer the Following