'Accounting Terminology Essay\r'

'Each of the side by side(p) statements may (or may not) describe one of these skilful terms. For all(prenominal) statement, indicate the chronicle term described, or answer â€Å"None” if the statement does not right describe any(prenominal) of the terms.\r\na. The level of gross sales at which revenue exactly equals monetary value and expenses. Break-even point. b. Costs prevail unchanged despite changes in sales volume. obdurate Costs. c. The span over which tabooput is likely to set out and assumptions about cost behavior generally appease valid. Relevant Range. d. Sales revenue slight uncertain be and expenses. Contribution beach. e. Unit sales outlay minus vari equal to(p) cost per unit. Unit region margin. f. The reduction in unit cost achieved from a higher level of output. Economics of scale. g. Costs the answer to changes in sales volume by less than a proportionate amount. Semi variable cost. h. in operation(p) income less variable cost. â€Å"N one”.\r\nExercise 20.7 †utilise Cost-Volume-Profit Formulas\r\nExercise 21.2 †Home Depot’s fiscal Statements: additive, Sunk, and Opportunity Costs Read the footnote in Appendix A referring to Home Depot’s conclusiveness to close all of its remaining tough box monetary funds in China. Write a petty paragraph identifying the incremental, sink and opportunity costs associated with this decision. go in t assume any cost savings impart be invested elsewhere in to a greater extent(prenominal) wareive butt ins.\r\nIncremental costs relate to the difference in costs between alternative head for the hillss of action and incremental revenues. The incremental costs that would be that would occur from all remodeling or closing Home Depot an existing fixture would admit cost of materials, overhead from the positive tangible remodel, labor that includes employee pay for rearranging and moving merchandise during a remodel if it occurred, designing a nd planning costs. Opportunity costs atomic number 18 important factors when it comes to decision making because they prep be the costs of taking some action in terms of the value foregone or that’s given up callable to a event action taken place. Opportunity costs of remolding would include profits on lost sales if the descent is closed during remodeling, loss of current sales due to decrease in customer traffic (due to immoderate noise, smell, dirt and inconveniences.\r\nStores could potentially lose profit if they are not able to stock the full attract of yields or keep open items stocked during a remodel. Whereas a sunk cost is an outlay that has been irrevocably incurred at some time in the past; sunk costs cannot be changed no matter what course of action is taken and are irrelevant for purposes of decision making involving the future. Sunk costs related to either remodeling of the store that would need to be taken into contemplation include original costs of the current store (decorations, paint, shelves, displays, carpet) and designs that allow for need to be replaced or outback(a) during either remodeling or closing.\r\nExercise 21.6 †Incremental psycho synopsis: Make or Buy Decision The cost to smartness Company of manufacturing 15,000 units of a elementicular offset is $135,000, of which $60,000 is fixed and $75,000 is variable. The go with can buy the part from an outside supplier for $6 per unit. Fixed costs will remain the same regardless of Swank’s decision. Should the company buy the part or continue to be it? Prepare a proportional schedule in the format illustrated in butt 21-6.\r\nIt would be more beneficial for the company to manufacture the part rather than buy it from an outside provider.\r\n skeleton Exercise 22.9 †Flows of Costs through Manufacturing Accounts The President of tatty low Ice Cream Company, a drawstring of ice cream stores in the Midwest, was unhappy with the actual six-month profit figures for the company recently prepared by the CFO. The president asked the CFO for a profit breakdown, by store, of the actual six-month results. When the President received the report, he was passing upset and called the CFO, into his office. The President stated, â€Å"These reports show that each store in the chain is profitable, but our company results are unprofitable! How can this be?” The CFO pointed out that each store was allowed to set prices for ice cream based on its cost structure. However, the stores’ cost structures did not include headquarters costs of the costs of advertisement and delivery of crossroads.\r\nWhat are the three characteristics for operating a successful duty account statement system? convey whether the news report system at Cold Moo Ice Cream Company includes the three characteristics of a successful responsibility accounting system. How could the responsibility accounting system at Cold Moo be improved?\r\nAs the Text book states, â€Å"measuring deed along the transmission channels of management responsibility is an important function. A responsibility accounting system holds individual managers responsible for the performance of the business hearts under their control and provides steer management with information useful in identifying strengths and weaknesses among units end-to-end the organization.” The three characteristics of a successful operating accounting system will include budgets, will measurement the performance, and contain timely performance reports. â€Å"Budgets serve as performance targets for each subunit in an organization. The accounting system will measure the performance of each responsibility center, and timely performance reports are prepared that compare the actual performance of each center with the amounts budgeted.”\r\nWhen reports are preformed frequently, it allows center managers to be able to keep their performances on target, and helps with the evaluation of the managers. It does not appear hat Cold Moo Ice Cream is sideline the timely reports method of the accounting system, which is essential to ensuring the financial information is accurate as possible, and to improve this manifestation should be more intertwined with the actual budget and more accurately present how the performance of the store is measured.\r\nTo do so the responsibility income statement should too be presented, this contains not only the operating results of a incident part of a business but also the revenue and expenses of each profit center at heart that part, which could be extremely important to see how those centers within the same area measure and stack up against one another. For the responsibility income statement to be enlightening and useful it should essentially and efficiently be able to detail Variable Costs, Contribution Margin, Fixed Costs, trackable Fixed Costs and Common Fixed Costs.\r\nIn addition, fixed costs that are com mon to both product lines amount to $125,000.00.\r\nInstructions\r\na. Prepare Chocolatiers’ responsibility income statement for the current month. Report the responsibility margin for each product line and income from operations for the company as a whole. Also include columns exhibit all dollar amounts as percentages of sales.\r\nb. According to the abbreviation performed in part a, which product line is more profitable? Should the common fixed costs be considered when determining the profitability of individual product lines? wherefore or why not? According the analysis in part a, the solid product line is more profitable. When determining profitability of any product line, common fixed costs should not be considered. Only the costs that are directly attributable to the product lines should be included. Common fixed costs are not directly traceable to any product, as they are arbitrarily allocated in proportion to a chosen factor, for example, machine hour or square fee t of a certain space occupied.\r\nc. Chocolatiers has $15,000.00 to be used in advertising for one of the deuce product lines and expects that the expenditure will result in additional sales of $50,000.00. How should the company decide which product line to advertise?\r\nThe effects of this campaign will typically be in both sales and variable costs, and therefore the company should select the product line based on which product will book the highest contribution margin ratio, which is the percentage of sales, expediency revenues or selling price that remains afterwards all variable costs and variable expenses have been covered. This method takes into consideration the limited time chassis of the advertising campaign, where fixed costs will close to likely not be affected.\r\n'