Managerial Accounting Chapter 1-2 Solutions

Castillo Products improved from an operating loss in 2009 to profitability in 2010. The net profit margin went from negative to positive. The asset turnover (total-sales-to-total-assets)

Bubba, I am writing this memo so that you can further understand the problem that you are encountering. You want to receive further funding in order for your restaurant to grow and expand across the country. The issue that the bank is having with you and the restaurant is that you are not supplying sufficient evidence for them to decide whether or not they want to grant the loan to you to expand your restaurant. Before the bank can decide on your loan, they require financial statements documenting the revenues, profits, and assets of your restaurant. These statements show the bank if you possess enough funds in order to pay back the loan but they also use it to measure the amount of potential for the restaurant because whenever a bank grants a loan to a business or business owner, they are making an investment in that individual or business.

Astaire Company uses the gross profit method to estimate inventory for monthly reporting purposes. Presented below is information for the month of May.

In our second assumption, instead of using the cost of goods per cases in 1986, we try to use the percentage it counts in the total expenses which is 50.4% and to find the sales needed to break-even. The detail of the calculation is shown in the answer for questions d. The result is that 95,635, a little bit higher than the estimated sales of 90,000.

a service department’s costs have been allocated, costs are not reallocated back to it under

I think that Net profit is more important than Gross profit because although the business could have £740,000 (2012) in Gross Profit, the business may have very high expenses therefore the net profit figures offer a more realistic figure of the finances available. The Net profit shows the actual profit once all expenses are deducted from the Gross profit. The expenses could be higher than the Gross profits which once deducted would leave the business at a loss when they thought they were making a profit from the Gross Profit. In 2012 the expenses were £733,000. Once this was taken off the Gross Profit it left a Net profit of £7,000. If the expenses were even higher than the Net profit figure this would have been a negative balance causing problems for the business.

Starting Inventory plus purchases equal Goods available for sale minus the Ending inventory equal Items sold. Or 50 + 500 – 756 = 475.

Explanations: 5. b. Gross profit = $2,505 (Sales revenue $4,319 – Cost of goods sold $1,814)

The $320,000, on the other hand, is a fixed cost associated with the proposed addition.

1. Internal control is a process designed to guarantee the achievement of the objectives of reliable financial reporting, compliance with laws and regulations and ineffective and inefficient operations.

Company operates in the Industrial Sector – Services, and Industry – Regional Airlines. According to the Standard Industrial Classification System (SIC), company belongs to the industry group 451: Air

$2,000,000 + No. of employees * $500,000 = No. of employees * Volume of sales * Selling Price

net sales: $1,000,000 cost of goods sold: $700,000 rent: $20,000 wages: $100,000 other operating expenses: $50,000 net sales – all operating expenses = 530,000

How a firm plans to earn a profit is one of the most important considerations in the business plan. Profit is defined as total revenue less total expenses (Investopedia, 2013) and there are basically three levels of profit. The first level is the gross profit, which subtracts only the cost of sales; the second is the operating profit which subtracts fixed costs as well. The final profit is the net profit, which subtracts all costs of doing business, including taxes and financing costs like interest.

inventories of finished goods, or whether less was produced than sold, which would mean a