Answer the following questions using the information below:
Kramer Enterprises reports year-end information from 2015 as follows:
$\begin{array}{lr}
\text { Sales (160,000 units) } & \$ 960,000 \
\text { Cost of goods sold } & 640,000\\text { Gross margin } & 320,000 \
\text { Operating expenses } & 260,000 \
\text { Operating income }&\$60,000
\end{array}$ Kramer is developing the 2016 budget. In 2016 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 2016?
A) $720,000
B) $582,400
C) $691,200
D) $640,000

Question

Answer the following questions using the information below:
Kramer Enterprises reports year-end information from 2015 as follows:
 $\begin{array}{lr}
\text { Sales (160,000 units) } & \$ 960,000 \
\text { Cost of goods sold } & 640,000\\text { Gross margin } & 320,000 \
\text { Operating expenses } & 260,000 \
\text { Operating income }&\$60,000
\end{array}$ Kramer is developing the 2016 budget. In 2016 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 2016?
A) $720,000
B) $582,400
C) $691,200
D) $640,000

Quizplus · Accepted Answer

The cost of goods sold is a variable cost, so it will change with the sales volume. The sales volume is expected to decrease by 9%, so the new sales volume is 160,000 units * (1 - 0.09) = 145,600 units. The cost of goods sold per unit is $640,000 / 160,000 units = $4. The budgeted cost of goods sold for 2016 is 145,600 units * $4 = $582,400.

Answer the Following Questions Using the Information Below: Kramer Enterprises

Answer the Following Questions Using the Information Below:
Kramer Enterprises