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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?
A. US$68,000
B. US$84,000
C. US$67,200
D. US$85,000
Answer: C
Explanation:
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%).

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