HORNGRENS COST ACCOUNTING W/ACCESS
16th Edition
ISBN: 9781323687604
Author: Datar
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
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?
Chapter 20 Solutions
HORNGRENS COST ACCOUNTING W/ACCESS
Ch. 20 - Why do better decisions regarding the purchasing...Ch. 20 - Name six cost categories that are important in...Ch. 20 - What assumptions are made when using the simplest...Ch. 20 - Give examples of costs included in annual carrying...Ch. 20 - Give three examples of opportunity costs that...Ch. 20 - What are the steps in computing the cost of a...Ch. 20 - Why might goal-congruence issues arise when...Ch. 20 - JIT purchasing has many benefits but also some...Ch. 20 - What are three factors causing reductions in the...Ch. 20 - You should always choose the supplier who offers...
Ch. 20 - Prob. 20.11QCh. 20 - What are the main features of JIT production, and...Ch. 20 - Distinguish inventory-costing systems using...Ch. 20 - Describe three different versions of backflush...Ch. 20 - Discuss the differences between lean accounting...Ch. 20 - The order size associated with the...Ch. 20 - Prob. 20.17MCQCh. 20 - Prob. 20.18MCQCh. 20 - Lyle Co. has only one product line. For that line,...Ch. 20 - Just-in-time inventory assumes all of the...Ch. 20 - Economic order quantity for retailer. Wonder Line...Ch. 20 - Economic order quantity, effect of parameter...Ch. 20 - EOQ for a retailer. The Fabric World sells fabrics...Ch. 20 - EOQ for manufacturer. Sk8 Company produces...Ch. 20 - Sensitivity of EOQ to changes in relevant ordering...Ch. 20 - JIT production, relevant benefits, relevant costs....Ch. 20 - Backflush costing and JIT production. Grand...Ch. 20 - Backflush costing, two trigger points, materials...Ch. 20 - Backflush costing, two trigger points, completion...Ch. 20 - Prob. 20.30PCh. 20 - Prob. 20.31PCh. 20 - Prob. 20.32PCh. 20 - Prob. 20.33PCh. 20 - JIT purchasing, relevant benefits, relevant costs....Ch. 20 - Supply-chain effects on total relevant inventory...Ch. 20 - Supply-chain effects on total relevant inventory...Ch. 20 - Backflush costing and JIT production. The Acton...Ch. 20 - Backflush, two trigger points, materials purchase...Ch. 20 - Backflush, two trigger points, completion of...Ch. 20 - Lean accounting. Reliable Security Devices (RSD)...Ch. 20 - JIT production, relevant benefits, relevant costs,...
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Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- How do you calculate the markup on cost of goods sold? Is the markup pure profit? Explain.arrow_forwardIf merchandise inventory is being valued at cost and the purchase price is steadily falling, which method of costing will yield the largest net income? Select one: a. average cost. b. LIFO. c. FIFO. d. weighted average. e. All methods will result in the same figure of net income.arrow_forwardWhat is the proper journal entry, and what is the increase in Cost of Goods Sold, the decrease in Income Before Income Taxes, and the decrease in Income After Taxes?arrow_forward
- How should accounting be able to catch up with the high sales return rates, particularly on inventory management?arrow_forwardContrast the effects that LIFO vs. FIFO would have on ending inventory, net income and cash flow in a period in which prices are rising?arrow_forwardUnder the LIFO cost flow assumption during a period ofinflation, which of the following is false? A. Cost of goods sold will be lower than under FIFO B. Gross margin will be lower than under FIFO C. Income tax expense will be lower than under FIFO D. Ending inventory will be lower than under FIFOarrow_forward
- 1.Which of the following may not result to the amount of cost of sales? a.Net purchases less net increase in inventory b.Net decrease in inventory plus net purchases c.Total goods available for sale less beginning inventory d.Total goods available for sale less ending inventoryarrow_forwardCan you explain why the answer is B and not C. If inventory prices are decreasing wouldnt LIFO result in a lower COGS and which would lead to a higher Net income thus higher income tax expense?arrow_forwardGross income derived from business shall be equivalent to gross sales less sales returns, discount and allowances, but undiminished of cost of goods sold. TRUE OR FALSE?arrow_forward
- When the return on sales (also known as net profit margin) is negative, what does this mean? Group of answer choices Costs and expenses combined are bigger than sales Sales is smaller compared to net income The tax amount is higher than sales Cost of goods and operating expenses are higher than salesarrow_forwardIn calculating inventory turnover, why is cost of goods sold used as the numerator? As the inventory turnover increases, what increasing risk does the business assume?arrow_forward
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