In preparing projected statements, to project cost of goods sold and the expense items in the income statement, which of these methods is recommended?
A) Determining the net worth method
B) What a firm earns method
C) Percentage-of-sales method
D) Price-earnings ratio met
E) Outstanding shares method

Question

Quizplus · Accepted Answer

The percentage-of-sales method is commonly used to project the cost of goods sold and expense items in the income statement. This method involves estimating the percentage of sales that will be consumed by these items based on historical information and industry benchmarks. This percentage is then applied to the projected sales figure to arrive at the projected amount for cost of goods sold and expenses.

In Preparing Projected Statements, to Project Cost of Goods Sold