Chloe Mendez owns a clothing company, Chloe's Closet. She has a team of tailors who work for 8 hours every day from Monday to Saturday. Demand for her business is strong but there seems to be something preventing her from meeting the demands of her customers. Chloe sells to both big department stores and small boutique stores under the brand Chloe's Closet. Some brands also ask her to manufacture their own designs. Business for Chloe has been good since it started last 2014. In fact, despite the tough competition from cheaper manufacturers abroad, she still manages to grow her customer base. On December 4, 2015 Chloe received a billing statement from a raw material supplier for an amount of PHP400,000 which will be due in 5 days. She is also scheduled to pay her employees' monthly salary of PHP70,000 the following day. Upon checking her bank account, she only has a PHP67,000 balance. She knew she had exceeded her sales target last October and November so she is wondering why she only has this amount of cash in her bank account. Was her money stolen? Being a CPA, she checked the bank statement and her financial records and found no mistakes. Here is the latest financial statement of Chloe's Closet as of November 30, 2015: Statement of Financial Position Nov 30, 2015 Dec 31, 2014 60,000.00 270,000.00 Cash 740,000.00 500,000.00 Accounts Receivable 600,000.00 400,000.00 Inventory 800,000.00 850,000.00 Machinery 2,200,000.00 2,020,000.00 TOTAL ASSETS

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter18: Pricing And Profitability Analysis

Section: Chapter Questions

Problem 1CE: Ventana Window and Wall Treatments Company provides draperies, shades, and various window...

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QUESTION: WHAT’S WRONG WITH CHLOE’S CLOSET?

Accounts Payable
400,000.00
500,000.00
EROS
Salaries Payable
150,000.00
150,000.00
Total Liabilities
400,000.00
500,000.00
Capital Stock
200,000.00
200,000.00
Accumulated Profit
1,600,000.00
1,320,000.00
Total Equity
1,800,000.00
1,520,000.00
TOTAL EQUITY AND LIABILITIES
2,200,000.00
2,020,000.00
Statement of Financia! Position
Nov 30, 2015
Dec 31, 2014
Sales
800,000.00
600,000.00
Cost of Goods Sold
300,000.00
225,000.00
Operating Expenses
100,000.00
105,000.00
Operating Income
400,000.00
270,000.00
Machinery
120,000.00
81,000.00
NET INCOME
280,000.00
189,000.00
What's wrong with Chloe's Closet?

Transcribed Image Text:Chloe's Closet Chloe Mendez owns a clothing comparny, Chloe's Closet. She has a team of tailors who work for 8 hours every day from Monday to Saturday. Demand for her business is strong but there seems to be something preventing her from meeting the demands of her customers. Chloe sells to both big department stores and small boutique stores under the brand Chloe's Closet. Some brands also ask her to manufacture their own designs. Business for Chloe has been good since it started last 2014. In fact, despite the tough competition from cheaper manufacturers abroad, she still manages to grow her customer base. On December 4, 2015 Chloe received a billing statement from a raw material supplier for an amount of PHP400,000 which will be due in 5 days. She is also scheduled to pay her employees' monthly salary of PHP70,000 the following day. Upon checking her bank account, she only has a PHP67,000 balance. She knew she had exceeded her sales target last October and November so she is wondering why she only has this amount of cash in her bank account. Was her money stolen? Being a CPA, she checked the bank statement and her financial records and found no mistakes. Here is the latest financial statement of Chloe's Closet as of November 30, 2015: Statement of Financial Position Nov 30, 2015 Dec 31, 2014 60,000.00 270,000.00 Cash 740,000.00 500,000.00 Accounts Receivable 600,000.00 400,000.00 Inventory 800,000.00 850,000.00 Machinery 2,200,000.00 2,020,000.00 TOTAL ASSETS

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