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Accounting Information For Business Decisions 2nd Edition Billie Cunningham, Loren A. Nikolai, John Bazley, Marie Kavanagh, Geoff Slaughter, Sharelle Simmons - Solutions
Explain which costs are included in cost of goods sold and ending inventory under the(a) FIFO,(b) average cost and(c) LIFO cost flow assumptions.
What is the formula for calculating cost of goods sold (COGS) under the periodic inventory system?
Identify the parts and subsections of a retail business' classified income statement. What is included in each part?
Explain the impact of FIFO and LIFO on a company's income statement and balance sheet if costs are rising.
How are changes in a business' income statement accounts recorded in its accounting system?
Is GST included in the cost of inventory? Why or why not?
Explain the difference between a quantity discount and a sales (cash) discount.
Explain what is meant by the lower-of-cost-or-Net Realisable value method.
The Schulte Tape Business has a beginning inventory for May of \(\$ 2500\) (250 tapes at \(\$ 10\) each) and makes the following purchases and sales of tapes during May:Required: Calculate the cost of goods sold and the ending inventory for May if the company uses the following:a The perpetual
The Gomez Folding Chair Company has 400 chairs (at \(\$ 15\) each) in its beginning inventory for July. It makes the following purchases and sales of chairs during July:Required: Calculate the cost of goods sold and the ending inventory for July if the company uses the following:a The perpetual
Explain the difference between a sales return and a sales allowance.
What is a perpetual inventory system? How is a business' cost of goods sold determined under this system?
The Russell DVD business had 200 DVDs in its 1 April inventory. It uses the perpetual inventory system and made the following purchases and sales of DVDs during April and May:The FIFO and the LIFO costs of the DVDs in the 1 April inventory were \(\$ 12\) and \(\$ 8\), respectively.Required:a
What is a periodic inventory system? How is a business' cost of goods sold determined under this system?
The Brabham Kite Business had the following FIFO costs and replacement costs of kites for its ending inventory:Required:a Calculate the value of the ending inventory under the lower-of-cost-or-net realisable value.b How are the company's financial statements affected by the application of the
What are operating expenses? Explain the difference between selling expenses and general and administrative expenses.
The Suction Business' ending inventory of vacuum cleaner parts included the following items:Required:a Calculate the value of the ending inventory under the lower-of-cost-or-net realisable value method.b Show how the ending inventory would be reported on the company's balance sheet. Item # A12B
Explain the meaning of the terms 'risk', 'operating capability' and 'financial flexibility'.
The Ginther Power Tools Ltd had 100 air compressors in its 1 January inventory. It uses the perpetual inventory system and the FIFO inventory cost flow assumption. Ginther made the following purchases of air compressors during January and February.The costs of the 100 air compressors in the 1
What is ratio analysis and what is it used for?
When Janet Chiu arrived at her shop on the morning of 15 June 20X3, she found that thieves had broken in overnight and stolen much of her merchandise. The agent of Alright Insurance Company agreed to visit in the afternoon and promised the insurance company would cover the cost of the goods stolen,
Johnson Watches Ltd had 300 watches in its July 1 inventory. The company uses the perpetual inventory system and made the following purchases of watches during July and August.The costs of the 300 watches in the July 1 inventory were 100 units @ \(\$ 18\) and 200 units \(@\) \$19. Sales during July
Red Centre uses the FIFO inventory cost flow assumption. It includes the following amounts in the company's financial statements:The company sells only one product, and purchases and sales are made evenly throughout the year. The replacement cost of the inventory at 1 January and 31 December is
Explain how to calculate a business' profit margin. What is this ratio used for?
Explain what is included in a business' statement of changes in owner's equity and how the statement is used.
Explain how to calculate a business' gross profit percentage. What is this ratio used for?
What are closing entries and why are they used?
How does the statement of comprehensive income differ from the income statement?
Explain the importance of trends to analyse business performance. What methods and indicators would you use to analyse performance trends?
Short-term profits may be at the expense of long-term profits if consideration is not given to the environmental and social implications of that decision.a How could a decision that is profitable now impact on the social aspects of a firm's operations and reduce long-term profitability?b How could
On 1 October, Cooper's Appliance purchased \(\$ 8800\) of goods including GST for resale. On 11 October, it sold \(\$ 4500\) of these goods to customers at a selling price of \(\$ 6600\) including GST. The business uses a perpetual inventory system, and all transactions were for
The Costello Tax Services Business was established on 1 March of the current year to help clients with their tax planning. During January, the business entered into the following transactions.Required:a Record the above transactions in the appropriate accounts.b Prepare a trial balance.c Prepare a
On 9 February, Simmons Toy Shop made a \(\$ 198\) cash sale including GST of merchandise to a customer. The business uses a perpetual inventory system; the merchandise had cost Simmons Toy Shop \$110. On 12 February, the customer was given a sales allowance of \(\$ 55\) cash including GST for a
The Speedy Answering Service Business was started on 1 July of the current year to answer the phones of doctors, lawyers and accountants when they are away from their offices. The following transactions of the business occurred and adjustments were made in July.Required:a Record the above
The Jung Art Supplies Business sells various art supplies to local artists. The business uses a perpetual inventory system. The balance of its inventory of art supplies at the beginning of October was \(\$ 3000\). Its cash balance was \(\$ 960\) and the Jung, Capital balance was \(\$ 3960\) at the
The Khan Heater Business sells portable heaters and related equipment. The business uses a perpetual inventory system, and its inventory balance at the beginning of September was \(\$ 3900\). Its cash balance was \(\$ 2250\), and the I. Khan, Capital balance was \(\$ 6150\) at the beginning of
The following information is available for the Miller and Keen Business for the year.Required:Prepare a schedule that calculates the cost of goods sold for the year. Beginning inventory Ending inventory Purchases Purchases returns and allowances $ 135 000 150 000 306 000 12 000
The income statement information of the Walten Furniture Business for 20X2 and 20X3 is as follows.Required:Fill in the letters (a)-(f). All the necessary information is given. Cost of goods sold Interest expense Selling expenses Operating income Sales (net) General expenses Net income Interest
The following information is taken from the accounts of the Harrison's Moto Shop for the month of January of the current year.Required:a Prepare a classified income statement for Harrison's Moto Shop.b Calculate Harrison's profit margin. Cost of goods sold Sales revenue (net) Selling expenses
The following information is taken from the accounts of Xeno's Music Store for the current year ended 31 December.Of the rent expense, five-sixths is applicable to the shop and one-sixth is applicable to the office.Required:a Prepare a classified income statement for Xeno's Music Store for the
The 31 December 20X3 income statement accounts and other information of Lyon's Fashion are shown below.Required:a Prepare a classified 20X3 income statement for Lyon's Fashion.b Calculate the profit margin for \(20 \mathrm{X} 3\). If the profit margin for \(20 \mathrm{X} 2\) was 12.5 per cent, what
Since the future is uncertain and circumstances are likely to change, why should the managers and owners of a business bother to plan?
Describe the three main functions of a business plan.
Describe the components of a business plan. How does each of these components help an investor, a creditor, and a manager or owner to make decisions about a business?
Why is it important for businesses to have an environment management plan? List ten possible environmental costs that a breakfast cereal manufacturing business might incur.
Why is it important for a business to have a cash buffer on hand?
How can an entrepreneur determine a business' capital requirements?
What is the difference between short-term and long-term capital?
Explain what cost-volume-profit analysis is. How does cost-volume-profit analysis help entrepreneurs develop their companies' business plans?
How can you tell whether a cost is a variable cost or a fixed cost?
What is a contribution margin?
Define relevant range.
Explain what it means when a business breaks even.
Indicate the effect (increase, decrease, no change, or not enough information) that each of the following situations has on break-even unit sales. If you answer 'not enough information', list the information that you need in order to be able to determine the effect.a A retail business purchases
If the total variable cost per unit increases while the selling price per unit, the fixed costs and the sales volume remain the same, how would you expect the change in variable costs to affect profit? The break-even point?
If total fixed costs increase while the selling price per unit, the variable costs per unit and the sales volume remain the same, how would you expect the change in fixed costs to affect profit? The break-even point?
Go Green is a business selling worm farm start-up kits for \(\$ 12\) each. This year, Go Green's fixed cost totals \(\$ 110000\). The variable cost per kit is \(\$ 7\).Required:a What is the break-even point in number of kits?b How many kits does Go Green need to sell to earn a profit of \(\$
How does the income statement shown in Exhibit 2.8 help internal decision makers perform cost-volume-profit analysis?Exhibit 2.8 Total sales revenues ($11 x 720 boxes of chocolates) Less total variable costs: Cost of boxes of chocolate sold ($4.95 x 720 boxes) Total contribution margin Less total
Imagine that you are going to start your own business. Think about the concept for a minute. Required:What will you call your business? What kind of product or service will you sell? What price will you charge for your product or service? Why? What variable costs and what fixed costs do you think
Suppose you want to start a business that sells sports equipment.Required:Go to the reference section of your library. What type of information can you find in Moody's or Standard \& Poor's to help you prepare projected financial statements for your business?
TLC Company sells a single product, a food basket (containing fruit, cheese, nuts and other items) that friends and family can purchase for university students who need a little extra TLC. This product, called the Exam-O-Rama, sells for \(\$ 10\) per basket. The variable cost is \(\$ 6\) per
ExamChoc Company sells a single product, a chocolate basket that friends and family can purchase for university students studying for their exams. This product, called the Exam-O-Choc, sells for \(\$ 20\) per basket. The variable cost is \(\$ 14\) per basket, and the total fixed cost is \(\$
Bathtub Rings is a business that sells shower-curtain rings for \(\$ 1.60\) per box. The variable cost is \(\$ 1.20\) per box, and the fixed cost totals \(\$ 20000\) per year.Required:a What is Bathtub Rings' profit equation in terms of boxes of shower-curtain rings sold?b Draw a graph of Bathtub
Tube Rings is a business that sells tube inners for \(\$ 50\) per box. The variable cost is \(\$ 30\) per inner, and the fixed cost totals \(\$ 400000\) per year.Required:a What is Tube Rings' profit equation in terms of tube inners sold?b Draw a graph of Tube Rings' total contribution margin and
Silencer Company sells a single product, mufflers for leaf blowers. The business' profit calculation for last year is shown here:Silencer has decided to increase the price of its product to \(\$ 30\) per muffler. The business believes that if it increases its fixed advertising (selling) cost by
Green Grow is a business selling organic fertiliser bags for \(\$ 24\) each. This year, Green Grow's fixed cost totals \(\$ 110000\). The variable cost per bag is \(\$ 14\).Required:a What is the break-even point in number of bags?b How many bags does Green Grow need to sell to earn a profit of
Rapunzel is a small business that currently sells a single product, shampoo, for \(\$ 4\) per bottle. The variable cost per bottle is \(\$ 3\). Rapunzel's fixed cost totals \(\$ 6000\).Required:a Calculate the following amounts for Rapunzel business:i contribution margin per bottle of shampoo ii
The Body Shop Equipment Company (BSEC) sells a small, relatively lightweight, multipurpose exercise machine. This machine sells for \(\$ 700\). A recent cost analysis shows that the BSEC's cost structure for the coming year is as follows:Required:a Draw a graph that clearly shows (i) total fixed
Thumper is a small business that currently sells a single product, gluten-free bread, for \(\$ 6\) per loaf. The variable cost per loaf is \(\$ 4\). Thumper's fixed cost totals \(\$ 6000\).Required:a Calculate the following amounts for Thumper's business:i contribution margin per loaf ii break-even
The Water Ski Equipment Company (WSEC) sells a small, relatively lightweight kneeboard. This kneeboard sells for \(\$ 350\). A recent cost analysis shows that the WSEC's cost structure for the coming year is as follows:Required:a Draw a graph that clearly shows (i) total fixed cost, (ii) total
Lady MacBath is a business selling bottles of dry cleaning solvent (spot remover) for \(\$ 10\) each. The variable cost for each bottle is \(\$ 4\). Lady MacBath's total fixed cost for the year is \(\$ 3600\). Required:a Answer the following questions about the business' break-even point.i How many
The Brickhouse Company is planning to lease a fuel-efficient, hybrid delivery van for its northern sales territory. They can choose to lease the van under three alternative plans:- Plan A - Brickhouse would pay \(\$ 0.34\) per kilometre and buy its own fuel.- Plan B - Brickhouse would pay \(\$
Mallory Motors sells small electric motors for \(\$ 2\) each. Variable costs are \(\$ 1.20\) per unit, and fixed costs total \(\$ 60000\) per year.Required:a Write out Mallory's profit equation in terms of motors sold.b Draw a graph of Mallory's total contribution margin and total fixed cost as
Campcraft is a small manufacturer of camping trailers. The business manufactures only one model and sells the units for \(\$ 2500\) each. The variable costs of manufacturing and selling each trailer are \(\$ 1900\). The total fixed cost amounts to \(\$ 180000\) per year.Required:a Calculate
This year Babco's fixed costs total \(\$ 110000\). The business sells recyclable 1 -litre thermos drink containers for \(\$ 13\) each. The variable cost per container is \(\$ 8\).Required:a Compute the break-even point in number of containers.b Compute the number of containers that Babco must sell
Simmons Kitchens sells small electric knives for \(\$ 4\) each. Variable costs are \(\$ 2.40\) per unit, and fixed costs total \(\$ 60000\) per year.Required:a Write out Simmons' profit equation in terms of knives sold.b Draw a graph of Simmons' total contribution margin and total fixed cost as
An internationally renowned professor specialising in management accounting has agreed to conduct a one-day seminar at a university for management executives. The Head of the Graduate School initially offered the professor the regular compensation package of a business-class airfare and
Refer to 2.38. What if your aunt instead gave you $100000 and you were interested in investing it in Sweet Temptations?Required:Would this change your answers to 2.38? Why or why not?Data from in 2.38.Suppose your wealthy aunt gave you and your cousins $10000 each. Assume for a moment that you are
The Cardiff Company sells a single product for \(\$ 40\) per unit. Its total fixed cost amounts to \(\$ 360000\) per year, and its variable cost per unit is \(\$ 34\).Required:a Compute the following amounts for the Cardiff Company:i contribution margin per unit ii break-even point in units iii the
Suppose your wealthy aunt gave you and your cousins \(\$ 10000\) each. Assume for a moment that you are not associated with Sweet Temptations and that you are considering loaning the \(\$ 10000\) to Sweet Temptations.Required:From the information included in Sweet Temptations' business plan so far,
The Vend-O-Bait Company operates and services bait vending machines placed in service stations, motels and restaurants surrounding a large lake. Vend-O-Bait rents 200 machines from the manufacturer. It also rents the space occupied by the machines at each location where it places the machines.
John Williams Company sells a single product - bush hats - for \(\$ 24\) per hat. The total fixed cost is \(\$ 180000\) per year, and the variable cost per hat is \(\$ 15\).Required:a Compute the following amounts for John Williams Company:i contribution margin per hat ii break-even point in hats
Refer to 2.30. Suppose your boss at Lady MacBath is considering some alternative plans and would like your input on the following three independent alternatives:1 Increase the selling price per bottle by \(\$ 3\).2 Decrease the variable cost per bottle by \(\$ 2\) by purchasing an equally
Suppose you work for the Miniola Hills Bus Company. The business' ten buses made a total of 80 trips per day on 310 days last year, for a total of 350000 kilometres. Another year like last year will put the business out of business (and you out of a job!). Your boss has come to you for help. Last
Fred Sports manufactures trucks and four-wheel drive vehicles (4WDs). The company announced that it planned to eliminate 1000 jobs (25 per cent of its work force) over the next three years. Fred Sports plans to achieve these job cuts through normal attrition, a freeze on hiring and an
In the context of fixed and variable costs, in general, if my company's sales volume doubles, should I also expect my profits to double? Explain why or why not.
What is it about budgeting that adds discipline to the planning process?
If a problem comes to light during the budgeting process, what is the manager likely to do?
'Budgeting serves as a benchmark for evaluation.' Explain what this statement means.
Describe a master budget. Why might a master budget be different from one business to another?
How are the master budgets of a retail business and a service business similar to each other? How are they different from each other?
Describe the operating cycle of a retail business. How are the operating cycles of a retail business and a service business similar to and different from each other?
Why must the sales budget be developed before any of the other budgets? Where does information for sales forecasts come from?
If you just finished budgeting sales for next year, what information would you need to be able to budget cash collections from sales?
How does knowing forecasted sales help a manager develop a purchases budget? What else besides forecasted sales would a manager have to know to complete the purchases budget?
When developing a selling expenses budget and a general and administrative expenses budget, why do you have to know how expenses behave?
Why must you complete all the other budgets before you can develop the cash budget?
Why is it important to know about anticipated cash shortages ahead of time?
What is a 'cash buffer' and what is an example of a circumstance where a business could use one?
Why is having too much cash on hand a problem?
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