By following the matching principle all of the costs associated with a particular product, not just its wholesale price, is expensed when the item is sold. Requirement 2 - A Generally, the lower of cost or market method is used to value inventory in order to “avoid reporting inventory at an amount greater than the benefits it can provide” (Spiceland, Sepe, & Nelson, 2013, p. 476). According to Spiceland, Sepe, and Nelson (2013) the “change in replacement cost usually is a good indicator of the direction of change in selling price” (p. 477). When the change in replacement cost is negative the LCM method allows companies to apply the conservatism principle. The conservatism principle involves “recognizing expenses and liabilities as soon as possible when there is uncertainty about the outcome, but to only recognize revenues and assets when they are assured of being received” (The conservatism principle).
This decrease should be tied to a plan and sales strategies and goals established in the organization. Additional, a effects on the decline of inventory also can be interpreted as a good handling purchases of goods, movement control, and control storage costs among
ECON 1312 Homework Assignment # 2 Chapter 4 1. Why do we need a units-free measure of the responsiveness of the quantity demanded of a good or service to a change in its price? Answer: To measure or to compare the demand of the two unrelated goods or services. 2. Define the price elasticity of demand and show how it is calculated.
According to ASC 605-50-45-1 Revenue Recognition, a vendor may give a customer a sales incentive or other consideration. This Subtopic addresses the circumstances under which that consideration is either: (a) An adjustment of the selling prices of the vendor’s products or services will therefore be characterized as a reduction of revenue when recognized in the vendor’s income statement; (b) A cost incurred by the vendor for assets or services received from the customer and therefore characterized as a cost or expense when recognized in the vendor’s income statement. So, how the referral credit will be documented on the income statement that depends upon whether the consideration is in the form of cash or in the form of a free product or service According ASC 605-50-45-2 and 605-50-45-3, Cash consideration includes not only actual cash payments to the customer, but also incentives that reduce the customer’s present or future payment obligation. For example, credits against future purchases are a cash consideration. Examples of free products or services include gift certificates or free airline tickets that will be honored by another, unrelated entity.
What theory of profit best reflects the performance of the plasma screen makers? 2 To reduce Agency Problems, executive compensation should be designed to: Correct Answer: create incentives so that managers act like owners of the firm. 3 Economic profit is defined as the difference between revenue
It also shows some other possible objectives for the firm. Sales revenue maximisation, for example, occurs when marginal revenue is equal to zero, as the next unit produced would carry a negative marginal revenue and hence reduce total revenue. The point where the volume of sales of the good are maximised subject to making at least normal profit is also shown (at the point where AR=AC). An Diagram Possible objectives of the firm I Profit maximisation may become
Case 1: Revenue Recognition According to ASC 605-50-25, Revenue recognition - customer payments and incentives “Costs that are directly related to the acquisition of a contract and that would have not been incurred but for the acquisition of that contract (incremental direct acquisition costs) shall be deferred and charged to expense in proportion to the revenue recognized. When is revenue considered to have been earned/realized/realizable in recognition? Revenue is considered earned when a good or service is either delivered or preformed and inflow is received (cash, receivable, etc.). It is is realized when a product is exchanged for cash or claims to cash (something must change hands). There are four main conditions for revenue
We have to distinguish what rate of KBC's these properties speak to and the related holding costs. Given the noticeable stock and existing Distribution Center it may be suitable to hold movers in a focal area accordingly diminishing general volumes in the retail outlets and related outdoors costs. Based on further examination, it might be suitable to create a practice where movers are not held by KBC yet are sent direct from the supplier to the client upon interest. All clients could be offered the on-line or best cost for these requests to expand general consumer loyalty while decreasing the conveyance time by direct
As you can see, the choice of an inventory method often can significantly affect gross profit and hence net income (and also ending inventory valuation for balance sheet purposes). Specific Identification The specific identification method (column 1) recognizes the actual cost paid for the specific physical item sold. Gross profit depends on which can the vendor sells. As Exhibit 16-18 shows, cost of goods sold could be either 30, 40, or 56 cents. Therefore, gross profit for operations of Monday through Thursday could be 60 cents, 50 cents, or 34 cents, depending on the particular can handed to the customer.
Perhaps we will get more information, and then try to analyze Pat’s concerns or issues, if any. After that, we will persuade the counterparty by using our source of power. For the settlement, we consider a package/bundle negotiation for invoice price, credit term and loan on call. In addition, we will try to lower the monthly rental payment by comparing the market price in order to save