CS Executive · Corporate Accounting and Financial Management · Forecasting Financial Statements
Sharma Textiles Ltd had sales of ₹40,00,000 last year and expects sales to grow by 15% next year. Using the percentage of sales method, cost of goods sold was 60% of sales and is assumed to stay in the same proportion. What is the forecast cost of goods sold for next year?
Forecast sales are ₹46,00,000 (₹40,00,000 grown by 15%). With cost of goods sold at a constant 60% of sales, forecast cost of goods sold is ₹27,60,000. The figure ₹24,00,000 is wrong because it ignores the sales growth.
- A₹24,00,000
- B₹27,60,000Correct
- C₹29,00,000
- D₹6,90,000
Explanation
Forecast sales = 40,00,000 × 1.15 = ₹46,00,000. COGS = 60% × 46,00,000 = ₹27,60,000. Check: 24,00,000 × 1.15 = 27,60,000. The ₹24,00,000 option uses last year's sales and ignores growth.
Did you get it right without looking?
One question tells you little. A timed set on Forecasting Financial Statements shows your real accuracy, how long you take and where you lose marks.
More Forecasting Financial Statements questions
- In regression-based forecasting of sales on advertising spend, the line is Y = 20 + 4X, where Y is sales and X is advertising, both in Rs la…
- In forecasting the balance sheet using the projected income statement, which item acts as the balancing figure when assets exceed the sum of…
- Under the percentage of sales method, Meera Ltd has current sales of Rs 10,00,000 and inventory of Rs 2,00,000 which varies directly with sa…
- Which of the following best describes the primary purpose of financial forecasting in a company?
- Sunrise Textiles Ltd had sales of Rs 50,00,000 in the current year with inventory of Rs 6,00,000. Sales are forecast to rise to Rs 60,00,000…
- Sunrise Textiles Ltd had sales of ₹8,00,000 in the current year with cost of goods sold of ₹5,20,000 and other variable expenses of ₹80,000.…