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NEW QUESTION: 1
Philip Enterprises, distributor of compact disks (CDs), is developing its budgeted cost of goods sold. Philip has developed the following range of sales estimates and associated probabilities for the year:
Philip's cost of goods sold averages 80% of sales. What is the expected value of Philip's budgeted cost of goods sold?
The expected value is calculated by weighting each sales estimate by the probability of its occurrence. Consequently, the expected value of sales is US $84,000 [$60,000 x .25) + ($85,000 x .40) + ($100,000 x.35)]. Cost of goods sold is therefore US $67,200 ($84,000x80%).