Lipton Case Review - Mba Managerial Accounting Essay examples

Although the company did show an increased gross profit of $8,255,000 with $6,358,000 less Net Sales in 2013 versus 2012, that increase is due to the reduction in product Cost of Goods Sold by $14,613,000. Since increases in product price will negatively affect sales, one of management’s primary goals is to keep prices stable. This objective is achieved through implementation of cost cutting programs, investing in more efficient equipment, and automation of more steps in the production process.

If some research is undertaken that provides evidence that capital markets do not always behave in accordance with the Efficient Market Hypothesis, does this invalidate research that adopts an assumption that capital markets are efficient?

Develop and diagram an activity based cost model using the information in the case. Provide your best estimates about the cost and profitability of Wilkerson’s three product lines. What difference does your cost assignment have on reported product costs and profitability? What causes any shifts in cost and profitability?

According to the fact of this case, Parent Co. (Parent) wholly owns Poor Son Co. (Poor Son) as a legal subsidiary, and both of them all nonpublic companies. However, in January 2007 Poor Son filed a voluntary bankruptcy under Chapter 11 of the U.S. bankruptcy code because of its inability of meet obligations as they became due. Then, Parent claimed the loss of control of Poor Son and deconsolidated Poor Son from its financial statement. Through the bidding process in May 2009, Poor Son and OtherCo, the winning sponsor, filed a joint plan of reorganization to the bankruptcy court, but the plan was rescinded by OtherCo later due to significant market value shrink of Poor Son. After that, the

Accounts receivable are amounts owed by customers on account. They result from the sale of goods and services on credit. These receivables are generally expected to be collected within 30 to 60 days. They are typically the most significant type of claim held by a company. Accounts receivable and notes receivable resulting from sales are also known as trade receivables. Accounts receivable resulting from sales are referred to as trade receivables in Alcatel's financial statements.

Assess the degree to which the firm’s accounting reflects the underlying business reality. Identify accounting distortions and evaluate their impact on profits and the sustainability of profits.

Due to the information, 20 acres of land equal 80 sheep according to the exchange rate of last year, a one-room cabin equal 3 acres of land and equal 12 sheep finally, a plow equals 2 goat and equal 2/3 sheep according to last year’s exchange rate and 2 carts which were traded with a poor acre of land equals 8 sheep plus 400 sheep. So Deyonne’s total assets are 500(2/3) sheep. Deyonne’s liabilities and assets deduction are 35 sheep plus 3 sheep, which will come to 38 sheep,

On the other hand, fixed cost is a sunk cost unless the plant shutting down, thus it is irrelevant. As a result, EROW should manufacture as much as possible in its plant before transferring from NASA.

Historic cost depreciation is being used which leads to skewed numbers that misrepresent how well a product line will continue to operate in the future due to understated replacement value of fixed assets.

The increase in profit margins the firm is seeking on the sale of T-30 should have been gained through cost savings determined through the line by line analysis, saving money in the selling and administration of the factory or in general overhead as opposed to raising the price to $4 per yard.

The current simple allocation approach is insurance premiums and sales commissions are tracked at the legal business unit entity and product line level to properly compensate sales agents. Certain support functions are only accounted for at the corporate level and are subsequently allocated to product lines and business units according to the number of policies outstanding. Along with the recent development trend, Hampton thinks that this approach cannot reflect the claim on resources that is made by various business units and product lines. She also realizes that although sales volume has increased, profitability declines. So a new approach is necessary and extremely urgent. Better and appropriate allocation approach can help management obtain more accurate insight into product profitability, make correct product pricing decisions and so on.

5. The cannibalization of the profits of regular cranapple sales must be included in the analysis. This an example of a negative within-firm externality and it gets charged as an expense because it is technically lost cash flows. Management of Cranfield would have to use careful thinking and good judgement when analyzing this negative externality. If they choose not to make the lite product because of the cannibalization, then it opens the door for another firm to create the product and steal sales. The textbook sites IBM’s decision in the 1970’s to shift away from the PC business over fears of it hurting their mainframe business. That was obviously a huge mistake and acts as an example of why financial analysis can only take a firm so far. They must understand the industry and long run consequences of any given decision.

with a number of strategic issues facing a capital-intensive, mature industry. Their product costing system was

A financial analysis of Ford Motor Company’s (Ford) statements will identify their solvency in today’s automobile market. Elements such as liquidity, leverage, profitability, and activity ratios will demonstrate Ford’s financial health and stability. A further assessment of their technological advantages, global strategies, and benchmarking analysis will indicate the future prognosis of this company.

Based on the real world functioning of businesses, every organization that deals with the process of manufacturing of certain products operates in accordance with the main principle of maximizing its profits. During the performance of daily activities, many business managers face a series of questions related to planning, control and decision making. In order to give answers to all these questions, an additional analysis needs to be considered. It is very important for managers to plan carefully how they are going to generate sufficient money to pay down costs and, in this way to result with a profit. As managers are interested in having the adequate information about the influence that certain actions might have on the profitability of the business, "Cost Volume and Profit" analysis plays a significant role by being a potential tool in facilitating the process of making the right decisions regarding planning and control in order to add value to the company. (Trifan and Anton, 2011). To further illustrate the essential impact that CVP analysis has on management authorities in making better decisions, I will refer to and analyze the case of the Hampshire Company which follows as below.