A. Gross profit (gross margin) is equal to sales minus cost of goods sold. December sales are projected to be $520,000. Cost of goods sold is 80% of sales. Thus, the projected gross profit is 20% of sales, or $104,000.
B. This is the cost of goods sold for December. See the correct answer for a complete explanation.
C. Gross profit (gross margin) is equal to sales minus cost of goods sold. Thus, gross profit cannot be greater than the amount of sales, and sales are budgeted at $520,000 for December. See the correct answer for a complete explanation.
D. This answer is incorrect. See the correct answer for a complete explanation.
