Bobs Antiques, headquartered in Sarasota, Florida, builds reproductions of antique furniture. Bobs Antiques is beginning its 11
Question:
Bob’s Antiques, headquartered in Sarasota, Florida, builds reproductions of antique furniture. Bob’s Antiques is beginning its 11th year of business. It continues to grow its target customer market by expanding to new territories. Recently, Bob’s Antiques became a public company by issuing its shares of common stock on the NASDAQ exchange.
Bob’s Antiques reproduces just three types of antiques. Those products are clocks, dinette sets, and bedroom suites. The bedroom suites have a higher profit margin when compared to the other products, but it also has a lower sales volume. The clocks have a lower profit margin when compared to the other products, but it also has a greater sales volume. The products produced are only sold to independent distributors.
Bob’s Antiques tries to produce the same number of antiques it expects to sell during the period. However, sales can not always be accurately predicted because of fluctuations within the market. If Bob’s Antiques manufactures not enough antiques, it will lose sales. If Bob’s Antiques manufactures too many antiques, those antiques may sit in inventory, which may run the risk of becoming obsolete due to changes in customer preferences. Bob’s Antiques may be able to liquidate its excess inventory at reduced prices through discount chain stores. In order to reduce inventory costs, Bob’s Antiques is considering implementing a Just in Time inventory (JIT) management system.
Goals for the next year are to grow the business to other regions and increase its profit margins. At this time, Bob’s Antiques does not wish to expand its product lines.
Operating activities are the costs associated with the reproduction of antiques. Explain what costs are considered to be apart of the cost of products. In specific, there are three classifications of cost that should be considered. Given these costs, how would you as the accountant define profits for these product lines?
Financial Reporting and Analysis
ISBN: 978-1259722653
7th edition
Authors: Lawrence Revsine, Daniel Collins, Bruce Johnson, Fred Mittelstaedt, Leonard Soffer