...Running head: Scenario: The Guillermo Furniture Store Scenario: The Guillermo Furniture Store The University of Phoenix Scenario: The Guillermo Furniture Store The purpose of this paper is explain how Guillermo could use budgets and performance reports in the decision making process. This paper will also cover how ethics might influence his accounting decisions. Another part of this paper will explain what accounting information is most relevant for Guillermo to consider when making decisions.. Guillermo will use budgets and performance reports in the decision making process to evaluate their performance for score-keeping purposes. The production data provided shows where Guillermo is spending the money. The flex budget tells Guillermo that they produced more mid-grade than actually budgeted and less high-end than actually budgeted. The labor time was more on the mid-grade than budgeted and the less than budgeted on the high-end. On the variance analysis for June, the net earnings was a loss. By pinpointing where actual results differ from plans, performance reports can show Guillermo how they are doing and where to take action. Guillermo can use the flex budget information as attention directing reporting. The setup information data can be used to decide how to handle future business whether to become a representative for the company in Norway and change his focus from manufacturing to distribution. By using these reports, Guillermo can focus on operating...
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...Absorption costing is defined as a method for accumulating the costs associated with a production process and apportioning them to individual products. This type of costing is required by the accounting standards to create an inventory valuation that is stated in an organization's balance sheet. A product may absorb a broad range of fixed and variable costs. These costs are not recognized as expenses in the month when an entity pays for them. Instead, they remain in inventory as an asset until such time as the inventory is sold; at that point, they are charged to the cost of goods sold. Absorption Costing Components The key costs assigned to products under an absorption costing system are: Direct materials. Those materials that is included in a finished product. Direct labor. The factory labor costs required to construct a product. Variable manufacturing overhead. The costs to operate a manufacturing facility, which vary with production volume. Examples are supplies and electricity for production equipment. Fixed manufacturing overhead. The costs to operate a manufacturing facility, which do not vary with production volume. Examples are rent and insurance. It is possible to use activity-based costing (ABC) to allocate overhead costs for inventory valuation purposes under the absorption costing methodology. However, ABC is a time-consuming and expensive system to implement and maintain, and so is not very cost-effective when all you want to do is allocate inventory...
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...Costing Methods ACC561 - Accounting Michael Gaspar, CPA Costing Methods In every business, management needs to have a way to track their costs. These costs can be related to production, inventory, shipping, or overhead. There are many different ways for management to track these changes. Management can choose between traditional costing methods, job order costing system, process order cost system, and activity based costing. In our example, Super Bakery chooses to change their costing method to activity based costing to track their profit margins. In this paper, we will examine the strategies used by Super Bakery, reasons for changing to an activity based costing method, and if another costing method would have been a better choice. Strategies used by Super Bakery Inc. Unlike many production based organizations that produce all products in house as well as operate their sales division in house, Super Bakery contracts other organizations to sell, manufacture, warehouse, and ship the products under the Super Bakery name. By doing this, Super Bakery is able to keep its overhead low and continue to make a profit on their products. The other organizations incur the employee wages, machinery costs, and other expenses which are not billed to Super Bakery. Super Bakery can have four different companies handle the majority of operations, and they sit back and receive the profit. Why was it necessary to install an ABC system? Prior to installing an activity based costing...
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...Running head: COMPARISON OF FINANCIAL Comparison of Financial Statement Types Names withheld University of Phoenix Comparison of Financial Statement Types Financial statements summarize accounting transactions used to communicate economic information on an entity to decision makers, investors, and other stakeholders. This team will explain the concepts and purpose of each of four basic financial statements and how the elements of the four statements are interrelated. Balance Sheet “The balance sheet (also called a statement of financial position) is a snapshot of the financial status of an organization at an instant of time (Horngren, Sundem, Stratton, Burgstahler, & Schatzberg, 2008, p. 683).” There are two segments to the balance sheet (1) assets (2) liabilities plus owners’ equity. The equation for the balance sheet is assets = liabilities + equity. Totals of assets must equal the total of liabilities plus the owners’ equity. “Assets are divided into current and noncurrent categories (Horngren, et al, 2008, p. 758).” Some of the common assets of a company are cash, accounts receivables, inventories, and prepaid expenses. The economic resources owned by a company are assets. The balance sheet shows both current and long-term liabilities. The owners’ equity shows how much capital each stockholder has invested in the company as well as the earnings it retains. There are various accounts that companies show on the assets and liability portion of the spreadsheet...
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...Tootsie Roll Industries Loan Package ACC/561 December 16, 2012 Myrtle Clark Tootsie Roll Industries Loan Package “Tootsie Roll Industries has grown to become one of the country’s largest candy companies, with a lineup that includes some of the world’s most popular candy, chocolate, and bubble gum brands,” (Tootsie Roll Industries, 2012, p.1). Through the creation of the tootsie roll and other products, the Tootsie Roll Industry has maintained an innovative stand within the market. Expanding production of new products and manufacturing buildings the Tootsie Roll Industry are in need of a loan that will help increase the company’s liability by 10%. To accomplish this increase an adequate loan package will help in seeking for those needed funds. The loan package will include a liquidity ratio, solvency ratio, and profitability ratio explaining how and why the loan will be beneficial to the Tootsie Roll Industry as well as showing the creditor the low level of risk that will be involved. Ratio Analysis of Financial Statement Liquidity |Liquidity Ratios |2007 |2006 | |Working capital |$141754 |$128706 | |Current ratio |3.45 |3.07 | |Current cash debt coverage |1.50...
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...Financial Statement Differentiation Joshua Tabaka University of Phoenix ACC/561 WH12MBA06 March 20, 2013 Instructor: Norris Dorsey Workshop 1 Financial Statement Differentiation There are four major types of financial statements and they include the balance sheet, income statement, statement of equity and statement of cash flows. The balance sheet shows the assets, liabilities and equity balances as of a given point in time. It will typically show the short-term and long-term liquidity and obligations of the company, as well as the leverage of the company and capital structure (Investopedia, 2013) . The income statement shows the components of profit and loss for a certain accounting period. It will typically also show subtotals for gross profit, operating income, and net income after taxes. Normally this is shown over a quarter or fiscal year (Investopedia, 2013). The statement of owners’ equity shows the activity with the company’s owners for a specified period of time. It will also show changes in assets and liabilities that do not impact income, such as unrealized gains and losses on securities (accounting-basics-for-students.com, 2013) The statement of cash flows shows the cash inflows and outflows of the company for a specified period of time. All companies are required to provide this report to the SEC quarterly (Investopedia, 2013). The first of two ways to prepare a statement of cash flows if the direct method, which shows the actual inflows...
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...CVP Analysis and Presentation ACC/561 2012 Cost Volume Profit and Break-Even Analysis Break-Even Analysis-Volume-Analysis is a systematic method of examining the relationship between changes in volume (that is output) and changes in Sales Revenue, Express and Net Profit. As a model of these relationships, Break-Even Analysis simplifies the real-world conditions which a firm will face. The objective of Break-Even Analysis is to establish what will happen to the financial results if a specified level of activity or volume fluctuates. This information is vital to management, as one of the most important variables influencing total sales revenue, total costs and profits is output or volume. Break-Even Analysis is based on the relationship between sales revenue, costs and profit in the short run. The short run being a period in which the output of the firm is restricted to that available from current operating capacity in the short run, some inputs can be increased but others cannot. For example, additional supplies of materials and unskilled labor may be obtained at short notice, but it takes time to expand the capacity of the Plant and Machinery. Thus output is limited in the short run because Plant facilities cannot be expanded. It also takes time to reduce capacity, and therefore, in the short run, a firm must operate on a relative constant stock of production resources. Break-Even Analysis Assumptions It is essential that anyone preparing...
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...CHAPTER 1 SELF TEST 1. | (SO 1)Which is not one of the three forms of business organization? a. Sole proprietorship. b. Creditorship. c. Partnership. d. Corporation. | | | 2. | (SO 1)Which is an advantage of corporations relative to partnerships and sole proprietorships? a. Lower taxes. b. Harder to transfer ownership. c. Reduced legal liability for investors. d. Most common form of organization. | | | 3. | (SO 2)Which statement about users of accounting information is incorrect? a. Management is considered an internal user. b. Taxing authorities are considered external users. c. Present creditors are considered external users. d. Regulatory authorities are considered internal users. | | | 4. | (SO 2)Which of the following did not result from the Sarbanes-Oxley Act? a. Top management must now certify the accuracy of financial information. b. Penalties for fraudulent activity increased. c. Independence of auditors increased. d. Tax rates on corporations increased. | | | 5. | (SO 3)Which is not one of the three primary business activities? a. Financing. b. Operating. c. Advertising. d. Investing. | | | 6. | (SO 3)Which of the following is an example of a financing activity? a. Issuing shares of common stock. b. Selling goods on account. c. Buying delivery equipment. d. Buying inventory. | | | 7. | (SO 4)Net income will result during a time period when: a. assets...
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...Financial Statement Review Gregory L Fowler Accounting ACC/5 April 6, 2015 Seth Jardine Financial Statement Review This assignment will serve as a financial statement review of Wal-Mart’s net income statement, stockholders equity, total value of assets, and the total cash flow from operations for the fiscal year ending January 31, 2014. Net Income 2014 The net income for 2014 was $16,022 million dollars, which was down from 2013, when Wal-Mart reported a net income of $16099 million dollars This information is important to investors because “investors (owners) use accounting information to make decisions to buy, hold, or sell stock. Creditors such as suppliers and bankers use accounting information to evaluate the risks of selling on credit or lending money” (Weygandt, Kimmel, & Kieso, 2011, Chapter 1 Introduction to financial statements). Some questions that may be answered by this information are: 1. Is Wal-Mart earning satisfactory income? 2. How does Wal-Mart compare in size and profitability with other retailers? 3. Will Wal-Mart be able to pay its debts as they come due? Stockholders’ Equity Total Wal-Mart Stockholders’ Equity in 2013 was $5395 million which was an increase from previous year, which was $$4446 million. “Labor unions would be interested in this information, because they want to know whether the company has the ability to pay increased wages and benefits” (Weygandt, Kimmel, & Kieso, 2011, Chapter 1 Introduction...
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...Costing Methods Paper- Learning Deliverable Team A found that the best method to utilize in the case of cost methods is the absorption method. Although in both the absorption and variable costing method there are net income losses, the loss of revenue for the absorption costing method is far less than that of the variable costing method. By utilizing this method over the variable costing method, we find that Polk Company saves money and can recover from loss by providing a more accurate visual of the profit goals of the company while giving the company a higher net income. Benefits of the absorption method include still have an option to sell the items during another period if the products are not sold within the same accounting period. If a company uses absorption costing that is the only method they will have to use. Flexible budgeting can be implemented and molded around the loss to cover the company from any potential recurrences of that amount of loss in the next year. In contrast, benefits of variable costing methods include having a lower manufacturing cost per unit while ensuring that bills and expenses are taken care over a period of time. This results in a surplus shown if products are sold within that period (Kimmel, 2011). In terms of a competitor submitting lower bids for a product, the variable costing method net income is not affected with changes in production, therefore managers don't tend to make the mistake of overproducing. The reality is that absorption...
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...Incremental Analysis ACC561 Incremental Analysis When a company has several business segments, one or two may be unprofitable. At this point, senior management should make a decision as to what course of action to take in order to deal with the unprofitable segment. Management must review the quantitative information in order to distinguish between those costs that will no longer exist if this particular business unit is eliminated. They also have to evaluate those costs that will continue and need to be covered by the remaining business units. Avoidable costs are the cost that will ago away when the segment no longer exists. On the other hand, Unavoidable costs are those costs that will remain even when the segment is no longer running. In order to prepare the quantitative analysis for mangers decision as to weather to close a business segment, the fixed expenses must be separated into avoidable and unavoidable costs. On the other hand, when a company or an organization sells more than one product and is limited in capacity, it should optimize its production in order to produce the maximum net income. Also, in order to maximize profit, a calculation of the contribution margin is required and the amount of the limited capacity each product uses has to be determined. The data that needs to determine production requirements are contribution margin along with machine hours required to produce the standard products (Incremental Analysis and Capital Budgeting, 2013)...
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...Management of Super Bakery Inc. University of Phoenix Online/ACC561 December 17, 2012 ABC and Management of Super Bakery Inc. Franco Harris is a former running back. He played for the Steelers and now owns the Super Bakery Inc. Company. This company supplies schools with baked goods like donuts that are vitamin and protein enriched. Super Bakery Inc. is a virtual company. Management Strategies Being a virtual company Super Bakery Inc. has few functions inside the company. The others like warehousing and shipping are outsourced keeping Super Bakery Inc.’s main function to organize the workflow. By doing this Super Bakery Inc. kept machinery and inventory expenses low and has been able to grow an average of twenty percent a year. One major drawback to outsourcing is maintaining relationships with other companies to fulfill the outsourced functions. One advantage of this is “adding maximum value to the company while making the minimum investment in permanent staff, fixed assets, and working capital.” (Kimmel, Weygandt, & Kieso, 2009) The ABC System Activity Based Costing helps to assign resource costs through activities to the products and services. This tool is usually used for understanding product and customer cost and profitability based on the production. ABC is used to support strategic decisions like outsourcing. Traditional costing methods were not working for Super Bakery Inc. Because they are nationwide there is a large cost difference in the...
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...ACC/561 January 21, 2013 Professor Willard Berry Financial statements provide crucial information to management, investors, and creditors. These statements include four documented forms cash flow statement, balance sheet, retained earnings, and income statement. The information contained in the reports provides a detailed picture to the condition of any business. A business evaluation containing all four documents is essential to form an accurate forecast in past and future objectives. Each document allows creditors, investors, and managers’ ability to further understand the financial workings of an individual company. Balance Sheet A balance sheet shows the dollar value at a specific time of the assets and liabilities of the company. The formula for this is Assets = Liabilities + Stockholders Equity. Assets are any resource in which a company possesses such as cash, equipment and property. Liabilities are shown as amounts or payables owed to the owner or creditor. Balance sheets for most companies are available to the public. By publishing this report lenders and investors can review the data and decide whether the company is worth the investment. Both investors and lenders can also determine if the company has the ability to repay a debt (John Wiley & Sons, 2009). Income Statement The income statement shows if a company has reported a profit or loss for a specific period. This statement is also referred to as a profit and loss statement...
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...Running head: AUNT CONNIE’S COOKIES Aunt Connie’s Cookies ACC/561 Aunt Connie’s Cookies How Aunt Connie’s Cookies could use cost accounting systems to determine their product costs Aunt Connie’s Cookies could utilize traditional cost accounting by using a mixture of materials and labor costs and allocating their expenses to each product. It would assume that the more cookies are created, the more overhead there will be. This would be a simple approach for Aunt Connie’s Cookies, but it may not necessary provide them with sufficient data to properly determine their product costs. Aunt Connie’s Cookies could use activity-based costing, in order to examine its costs by type of activity instead of end product. Unlike the traditional method, it would let the company analyze the overall systems with more detail in order for them to see if there are cost inefficiencies. It would be particularly helpful for Aunt Connie’s Cookies if its indirect costs are greater than its direct costs. If Aunt Connie’s Cookies were to utilize activity-based accounting, it would first need to identify its activities, and then designate a cost to each activity. Once that is completed, a determination of the components of each cost must take place, followed by data collection for every activity. Finally, a determination of the product costs can be made by dividing each product into unit-level activities, cost per batch, product-sustaining activities, and facility-sustaining...
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...Running head: AUNT CONNIE’S COOKIES Aunt Connie’s Cookies ACC/561 March 29, 2011 Tony Guice Aunt Connie’s Cookies How Aunt Connie’s Cookies could use cost accounting systems to determine their product costs Aunt Connie's Cookies can use customary cost accounting if they apply a mix of the labor and material costs, and apply expenses to each product. It assumes that more cookies baked could cause more overhead expenses. This is an easy method for Aunt Connie's Cookies, but it might not give them enough of the right information to really determine what their product costs are. Aunt Connie's Cookies might decide to use activity-based costing, which looks at costs according to the kind of activity rather than the end product. It is different from the traditional method in that it allows a company to look at their overall systems in detail, so that they can pinpoint any cost inefficiencies. It will especially help Aunt Connie's Cookies if they have greater indirect than direct costs. If Aunt Connie's Cookies used activity-based accounting, they would have to identify their activities, and then assign each activity a set cost. When they have done that, they identify how much each component of each activity costs, and then they take data about each activity. Eventually they can determine the actual product costs, when they divide each product into activities at unit-level, the cost-per-batch, facility-sustaining activities, and product-sustaining activities. ...
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