Question

While preparing the budgeted income statement of a merchandising company, the amount of cost of goods sold can be taken from the ________.

A) budgeted balance sheet
B) budgeted cash flow statement
C) inventory, purchases, and cost of goods sold budget
D) capital expenditures budget

Answer 1

The cost of goods sold for a merchandising company's budgeted income statement comes from the inventory, purchases, and cost of goods sold budget.

Step-by-step explanation:

While preparing the budgeted income statement of a merchandising company, the amount of cost of goods sold (COGS) can be taken from the C) inventory, purchases, and cost of goods sold budget. This budget includes detailed estimates of the cost of the inventory at the beginning of the period, purchases to be made during the period, and the expected inventory at the end of the period, which allows for the calculation of the cost of goods sold. Understanding COGS is essential as it directly impacts the gross profit and thus the overall profitability of the company.