a. Sales exceeded the budget by 10.7% ($75,000 ÷ $700,000), while cost of merchandise increased by 22.9% and salaries increased by only 11.4%. Thus, the investigation should focus on cost of merchandise since a 22.9% increase is disproportionate to the increase in sales. b. Electricity would not be a controllable cost for the manager of sporting goods, and it is doubtful that including it on a performance report for sporting goods would be
There is an inverse relationship between the number of tents inspected and the inspection cost per unit. Since the total inspection cost is fixed, the cost per unit will increase as the number of tents inspected decreases. Similarly, the cost per unit will decrease as the number of tents inspected increases. C. The inspector’s salary is an indirect cost. Since it is not related to the number of units inspected, it cannot be traced to any particular unit.
Financial Analysis- Task 5 A. 1. Some key points of the company’s financial picture that could impact the bank officer’s decision are as follows: while there is an increase in gross profits from year 12 to 13, there is a decrease from year 13 to 14, also while the payroll and executive compensations steadily increases from year 12 to 14, advertising basically decreases, and services and utilities continue to increase as well as expenses in general. The operating income also has a major decrease from year 12 to 14, which is not good for the company as it indicates what is available to the company before a few other items need to be paid, such as preferred stock dividends and income taxes, which needs to be increasing for the company, not
The company’s net cash from operations also decreased from 262.69 million to 233.58 million in 2005, a difference of 29.1 million. This decrease in operational cash flow was largely attributed to a significant increase in inventories to 164.41 million from 43.63 million. In addition, Tiffany posted operational losses of 12.03 million and increased prepaid expenses of 16.34 million in 2006. However, the company effectively managed its accounts payables for the year at 17.79 million, a significant change from the prior year. In addition, Tiffany increased ‘other non-cash’ items within its operations to 67.01 million.
However, the company was not able to sustain the growth in sales between years 7 and 8, which resulted in a decrease in net sales of -15% or $897,000. The company’s loss in net sales in year 8 is a weakness due to overall sales being down. Cost of goods sold (COGS) between years 6 and 7 show an increase of 31.8% or $1,048M. The increase in COGS corresponds closely with the increase in net sales for the same time period, which illustrates the company’s ability to effectively control its inventory levels and material costs. For years 7 and 8, the cost of goods sold decreased by -14.5% or $630,400, which again corresponds to the change in net sales for the same period.
Overhead decreased as a result of outsourcing but not as substantially as direct costs, thus causing the overhead allocation rate to increase significantly between 1988 and 1989. Question 2: Consider two products in the same product line: Expected Selling Price $62 $54 Standard Material Cost 16 27 Standard Labor Cost 6 3 Calculate the expected gross margins as a percentage of selling price on each product based on the 1988 and 1990 model year budgets, assuming selling price and material and labor cost do not change from standard. Product 1 1988: Gross margin = 62 - 16 - 6 – (6 * 434%) = 13.96 13.96 / 62 = 22.5% Product 2 1988: Gross margin = 54 - 27 - 3 – (3 * 434%) = 10.98 10.98 / 54 = 20.3% Product 1 1990: Gross margin = 62 - 16 - 6 – (6 * 563%) = 6.22 6.22 / 62 = 10.0% Product 2 1990: Gross margin = 54 - 27 - 3 – (3 * 563%)
Although the customers only needed the shipment the following year, this would be a way to exceed the targeted budget. Instead of offering the customers an early discount for receiving the merchandise earlier, Campbell sent the merchandise and reported the sales to be included in the financial reports. As a result of this procedure, the reported sales for the fourth quarter exceeded the budgeted amount with $80,000.00. The actual sales revenue for the year was over with $14,000.00. The internal auditors questioned why the two shipments were done before December 31, since the requested dates were in the following year.
Operating expenses- total operating expenses had declined in period 8 of $1,273,867 and have had a projection n the budget for period 9 of $1,026,483. This is unrealistic due to the fact that sales were anticipated to increase. The utilities and services have also been duplicated within the budget for operating expenses. It is listed under Facility/General operations cost then under expense. This duplication should be deleted as it is not necessary.
If each trailer contains 20 outrigger components, that means 800 outrigger components are manufactured a year at a cost of $120,080. This is compared to $86,560 if Mayes manufactured the components (See Table 1). That is a savings of $33,520 (a savings of 28%). However, the extra lead-time and an increase in inventory carrying costs would negate some of the
Due to the fact that Asian and other foreign textile manufacturers have been exported aggressively and consumer preferences are requiring higher-quality products with minimum defects, like other firms, Aurora tends to produce small amount of yarns produced with minimal period and provide to customized markets. Consequently, Aurora had decreased significantly its costs by reducing $3.9 million of SG&A expenses since 2000 and it was one reason of increasing operating profit and net earnings in 2002. Unfortunately, Aurora’s returned amount from retailers had been increased and the proportion of sales return of Aurora’s one plant named the Hunter reached 1.5% in 2002; thus, the firm’s income has not risen well. Figure 1 illustrates Aurora’s financial ratios by calculating given financial information through Exhibits 1, 2, and 6. The first, the company’s liquidity ratios-current ratio and quick ratio-had been increased smoothly for these four years.