Cost Accounting
Cost Accounting
15th Edition
ISBN: 9780133428834
Author: Horngren
Publisher: PEARSON
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Textbook Question
Chapter 20, Problem 20.1Q

Why do better decisions regarding the purchasing and managing of goods for sale frequently cause dramatic percentage increases in net income?

Expert Solution & Answer
Check Mark
To determine

Costing:

Costing is a technique used in cost accounting to determine the cost of a product. With the optimum use of costing a company can reduce the cost burden and increase the profit margin.

To explain: The reason for better decisions regarding the purchasing and managing of goods for sale frequently cause dramatic percentage increase in net income.

Answer to Problem 20.1Q

The net income is computed by the figures of sale and purchase so, if company manages purchase and sale optimally then there should be more net income of the company.

Explanation of Solution

The percentage of net income is depend on the percentage of cost of goods sold, so if percentage of cost of goods sold decreases the percentage of net income will increase.

Conclusion

Thus, manager should take better decision regarding purchase to increase the percentage of net income.

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Students have asked these similar questions
Why do better decisions regarding the purchasing and managing of goods for sale frequently cause dramatic percentage increases in net income?
When purchase prices are rising, which of the following statements is true? a.LIFO produces a higher cost of goods sold than FIFO. b.LIFO produces a higher cost for ending inventory than FIFO. c.FIFO produces a lower amount for net income than LIFO. d.Weighted average cost produces a higher net income than FIFO or LIFO.
Which inventory method will result in lower net income in a period of rising prices? Which inventory method will result in lower net income in a period of falling prices?
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    Inventory management; Author: The Finance Storyteller;https://www.youtube.com/watch?v=DZhHSR4_9B4;License: Standard Youtube License