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For C&G‟s Gift Shop, expected sales in units are reported on line 1. Note that the business is highly
seasonal, with most of the sales and profits realized during the months of November and December.
To keep the budget simple, we assume an average sales price of $100 per unit. In practice, however,
the business would forecast unit sales by individual product lines.
Budgeted Cost of Goods Sold (4)
C&G assumes a cost of goods sold of 65% of sales revenues. This results in a gross profit of 35%. For
a retail company, cost of goods sold represents the purchase cost of inventories sold during the period.
It is computed as:
where all inventories and purchases are computed at the purchase price to the company.