Accounting Case Import Distributor

1243 Words May 22nd, 2011 5 Pages
Situation
Import Distributors ,Inc ( IDI ) imported and distributed appliances to retail stores in the Rocky Mountain states. IDI has three board lines of merchandise:
1. Television Equipment
2. Audio Equipment
3. Kitchen Appliances
Each line accounted for about one-third of total sales IDI sales revenue;

In late 1993 : Company started to set up departmental income statements in obtain to see if each department is carrying its fair share of the load.
In early April of 1994, the first departmental income statement were distributed to the management group.
In the first quarter of 1994 television department had shown a gross margin that was much too small to cover the department’s operating expenses. As shown in following income
…show more content…
The calculation as follow:
Description Amount
Personnel Expenses $ -
Department manager's office $ 12,393.00
Rent
Inventory, Taxes and insurance $ 37,274.00
Utilities $ 3,006.00
Delivery Cost $ -
Sales Commissions $ 80,621.00
Administrative cost $ -
Inventory financing charge $ 23,708.00
Total Avoidable cost $ 157,002.00
Opportunity cost of losing gross margin $ 189,930.00
Incremental Income for the company $ (32,928.00)

As shown above, Closing down the Television Department will reduce Import Distributor Inc by $32,928.But, remember there are still unavoidable costs /operating fixed cost at $132.805,00 that must be carried by the Import Distributor Inc,

Another question is how is the company cost management system? As shown in the case the company uses gross margin income statement and most of operating expenses divide based on sales .

Conclusion and Recommendation
1. The company still experience loss when closing down the Television Departments even though

More about Accounting Case Import Distributor

Open Document