Matthew Company has a sales budget for next month of $400,000. Cost of goods sold is expected to be 40% of sales. All units are paid for in the month following purchase. The beginning inventory is $5,000 and an ending inventory of $12,000 is desired. Beginning accounts payable is $76,000. The cost of goods sold for next month is:

A) $220,000

B) $160,000

C) $172,000

D) $140,000

Cost of goods sold are B. $160000

Explanation:

The cost of goods sold is the cost that is associated with the inventory that is being sold in a particular period. It is the value of inventory that is recorded in books following a certain inventory valuation method. The cost of goods sold normally comprises of Opening Inventory + Purchases - Closing Inventory.

We are already given a ratio of Cost of goods sold to sales which is 40%. This means that out of the budgeted sales of 400000 for the next month, the 40% will comprise the cost of goods sold. Thus the cost of goods sold is,

Cost of goods sold = 400000 * 0.4 = $160000

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