Financial & Managerial Accounting
14th Edition
ISBN: 9781337119207
Author: Carl Warren, James M. Reeve, Jonathan Duchac
Publisher: Cengage Learning
expand_more
expand_more
format_list_bulleted
Question
Chapter 24, Problem 6DQ
To determine
Discontinuation of a Segment or Product: Often a product, a store or a segment of business is discontinued by the business, when it causes loss. This leads to the elimination of all the variable cost associated with the product or the segment of business.
To Explain: The financial considerations in deciding to eliminate a store.
Expert Solution & Answer
Trending nowThis is a popular solution!
Students have asked these similar questions
Many fast food chains, such as McDonald's, will occasionally discontinue restaurants in their system. What are some financial considerations in deciding to eliminate a store? In other words, what does McDonald's need to take into consideration when making this type of decision. In addition, do you think there are other non-financial measures should be considered?
Apple is considering eliminating one of its stores in a large U.S. city. What are some factors that it should consider in making this decision?
The top management of a fast-food hamburger chain is considering installing point-of-sale machines that will allow customers to pay for food with a credit card or debit card. Previously, the restaurant has accepted only cash.What information could the management accounting department supply to assist management with this decision?
Chapter 24 Solutions
Financial & Managerial Accounting
Ch. 24 - Explain the meaning of (A) differential revenue,...Ch. 24 - A company could sell a building for 250,000 or...Ch. 24 - A chemical company has a commodity-grade and...Ch. 24 - A company accepts incremental business at a...Ch. 24 - Prob. 5DQCh. 24 - Prob. 6DQCh. 24 - In the long run, the normal selling price must he...Ch. 24 - Although the cost-plus approach to product pricing...Ch. 24 - Prob. 9DQCh. 24 - What is the appropriate measure of a products...
Ch. 24 - Lease or sell McFadden Company owns equipment with...Ch. 24 - Prob. 24.2BECh. 24 - Make or buy A company manufactures various-sized...Ch. 24 - Replace equipment A machine with a book value of...Ch. 24 - Process or sell Product J19 is produced for 11 per...Ch. 24 - Accept business at special price Product A is...Ch. 24 - Product cost markup percentage Green Thumb Garden...Ch. 24 - Prob. 24.8BECh. 24 - Differential analysis for a lease or sell decision...Ch. 24 - Prob. 24.2EXCh. 24 - Differential analysis for a discontinued product A...Ch. 24 - Differential analysis for a discontinued product...Ch. 24 - Prob. 24.5EXCh. 24 - Prob. 24.6EXCh. 24 - Make-or-buy decision Fremont Computer Company has...Ch. 24 - Make-or-buy decision for a service company The...Ch. 24 - Machine replacement decision A company is...Ch. 24 - Differential analysis for machine replacement Kim...Ch. 24 - Sell or process further Calgary Lumber Company...Ch. 24 - Sell or process further Rise N Shine Coffee...Ch. 24 - Decision on accepting additional business...Ch. 24 - Accepting business at a special price Portable...Ch. 24 - Prob. 24.15EXCh. 24 - Product cost method of product pricing La Femme...Ch. 24 - Product cost method of product costing Smart...Ch. 24 - Target costing Toyota Motor Corporation uses...Ch. 24 - Target costing Instant Image Inc. manufactures...Ch. 24 - Prob. 24.20EXCh. 24 - Product decisions under bottlenecked operations...Ch. 24 - Appendix Total cost method of product pricing...Ch. 24 - Appendix Variable cost method of product pricing...Ch. 24 - Differential analysis involving opportunity costs...Ch. 24 - Differential analysis for machine replacement...Ch. 24 - Differential analysis for sales promotion proposal...Ch. 24 - Differential analysis for further processing The...Ch. 24 - Prob. 24.5APRCh. 24 - Product pricing and profit analysis with...Ch. 24 - Differential analysis involving opportunity costs...Ch. 24 - Differential analysis for machine replacement...Ch. 24 - Differential analysis for sales promotion proposal...Ch. 24 - Differential analysis for further processing The...Ch. 24 - Prob. 24.5BPRCh. 24 - Prob. 24.6BPRCh. 24 - Service yield pricing and differential analysis...Ch. 24 - Prob. 2ADMCh. 24 - Prob. 3ADMCh. 24 - Ethics in Action Aaron McKinney is a cost...Ch. 24 - Prob. 24.3TIF
Knowledge Booster
Similar questions
- In "Retail: Discounters Get Their Day”, Business Week, January 14, 2002, the authors suggest that consumers will try to stretch their dollars. So discounters and value-oriented retailers such as Wal-Mart Stores Inc. and Target Stores will continue to take market share away from mall-based department stores and specialty stores. The authors also suggest retailers will have “to keep an eye on inventory and other expenses." How could an excessive build-up of inventory hurt a retailer’s bottom line?arrow_forwardwhat revenues and costs are probably differential for the decision to close the Cornwall Street storearrow_forwardAssume that you work for Greeble’s Sporting Goods, and your manager requests that you outline the pros and cons of discontinuing its Golf department. That department appears to be generating losses, and your manager believes that discontinuing it will increase overall store profits. Prepare a memorandum to your manager outlining what management should consider when trying to decide whether to discontinue its Golf department.arrow_forward
- Why long term financing is important to Franchise of a fast-food outlet?arrow_forwardIn the decision by a grocery company that is trying to decide whether to keep or drop the bakery department in its grocery stores, what would the bakery managers salary be in relationship to the decision if the manager will be laid off?arrow_forwardYou are investing your money and opening a fast-food Mexican restaurant that accepts only cash for payments. You plan on periodically issuing coupons through the mail and in local newspapers. What controls (manual) can you set-up over inventory and cash? You are investing your money and opening a fast-food Mexican restaurant that accepts only cash for payments. You plan on periodically issuing coupons through the mail and in local newspapers. What controls (manual) can you set-up over inventory and cash?arrow_forward
- HomeGrown Company is a chain of grocery stores that are similar to indoor farmer's markets, providing fresh, local produce, meats, and dairy products to consumers in urban areas. HomeGrown is considering opening several stores in a new city, and has proposals from three contractors (Alpha, Beta, and Gamma companies) who would like to provide buildings for the new stores. The amount of expected revenue from the stores will depend on the design of the contractor. For example, if HomeGrown decides on a more open floor plan, with less shelf space for products, revenue would be lower overall. However, if HomeGrown decides on a very crowded floor plan, it may lose customers who appreciate a more open feel. As the project manager for HomeGrown, you are responsible for deciding which if any of the proposals to accept. HomeGrown's minimum acceptable rate of return is 20%. You receive the following data from the three contractors: Proposal Type of Floor Plan Investment if Selected…arrow_forwardHomeGrown Company is a chain of grocery stores that are similar to indoor farmer's markets, providing fresh, local produce, meats, and dairy products to consumers in urban areas. HomeGrown is considering opening several stores in a new city, and has proposals from three contractors (Alpha, Beta, and Gamma companies) who would like to provide buildings for the new stores. The amount of expected revenue from the stores will depend on the design of the contractor. For example, if HomeGrown decides on a more open floor plan, with less shelf space for products, revenue would be lower overall. However, if HomeGrown decides on a very crowded floor plan, it may lose customers who appreciate a more open feel. As the project manager for HomeGrown, you are responsible for deciding which if any of the proposals to accept. HomeGrown's minimum acceptable rate of return is 20%. You receive the following data from the three contractors: Proposal Type of Floor Plan Initial Cost if Selected…arrow_forwardHomeGrown Company is a chain of grocery stores that are similar to indoor farmer's markets, providing fresh, local produce, meats, and dairy products to consumers in urban areas. HomeGrown is considering opening several stores in a new city, and has proposals from three contractors (Alpha, Beta, and Gamma companies) who would like to provide buildings for the new stores. The amount of expected revenue from the stores will depend on the design of the contractor. For example, if HomeGrown decides on a more open floor plan, with less shelf space for products, revenue would be lower overall. However, if HomeGrown decides on a very crowded floor plan, it may lose customers who appreciate a more open feel. As the project manager for HomeGrown, you are responsible for deciding which if any of the proposals to accept. HomeGrown's minimum acceptable rate of return is 20%. You receive the following data from the three contractors: Proposal Type of Floor Plan Initial Cost if Selected…arrow_forward
- HomeGrown Company is a chain of grocery stores that are similar to indoor farmer's markets, providing fresh, local produce, meats, and dairy products to consumers in urban areas. HomeGrown is considering opening several stores in a new city, and has proposals from three contractors (Alpha, Beta, and Gamma companies) who would like to provide buildings for the new stores. The amount of expected revenue from the stores will depend on the design of the contractor. For example, if HomeGrown decides on a more open floor plan, with less shelf space for products, revenue would be lower overall. However, if HomeGrown decides on a very crowded floor plan, it may lose customers who appreciate a more open feel. As the project manager for HomeGrown, you are responsible for deciding which if any of the proposals to accept. HomeGrown's minimum acceptable rate of return is 20%. You receive the following data from the three contractors: Proposal Type of Floor Plan Initial Cost if Selected…arrow_forwardThe company manager (retail industry) stated that the company could lower its operating leverage by renting its stores rather than buying. Would you recommend this? Explain.arrow_forwardIn 1989, Robert Smith opened a small fruit and vegetable market in Bethlehem, Pennsylvania. Originally, Smith sold only produced grown on his family farm and orchard. As the markets popularity grew, however, he added bread, canned goods, fresh meats, and a limited supply of frozen goods. Today, Smiths market is a full range farmers market with a strong local customer base. Indeed, the markets reputation for low prices and high-quality draws customers from other Pennsylvania cities and even from the neighboring state of New Jersey. Currently, Smiths market has 40 employees. These include sales staff, shelf stockers, farm laborers, shift supervisors, and clerical staff. Recently, Smith has noticed a decline in profits and sales, while his purchases of products for resale have continued to rise. Although the company does not prepare audited financial statements, Robert Smith has commissioned your public accounting firm to assess his companys sales procedures and controls. Smiths market revenue cycle procedures are described in the following paragraphs: Revenue Cycle Customers push their shopping carts to the checkout register where a clerk processes the sale. The market has four registers, but they are not dedicated to specific sales clerks because the clerks play many roles in the day-to-day operations. In addition to checking out customers, sales clerks will stock shelves, unload delivery trucks, or perform other tasks as demand in various areas rises and falls throughout the day. This fluid-work demand makes the assignment of clerks to specific registers impractical. At the beginning of the shift, the shift supervisor collects four cash register drawers from the treasury clerk in an office in the back of the market. The drawers contain 100 each in small bills (known as float) to enable the clerks to make change. The supervisor signs a log indicating that he has taken custody of the float and places the drawers into the respective cash registers. Sales to customers are for cash, check, or credit card only. Credit card sales are performed in the usual way. The clerk swipes the card and obtains online approval from the card issuer at the time of sale. The customer then signs the credit card voucher, which the clerk places in a special compartment of the cash register drawer. The customer receives a receipt for the purchase and a copy of the credit card voucher. For payments by check, the clerk requires the customer to present a valid drivers license. The license number is added to the check and the check is matched against a black list of customers who have previously passed bad checks. If the customer is not on the list, the check is accepted for payment and placed in the cash register drawer. The clerk then gives the customer a receipt. The majority of sales are for cash. The clerk receives the cash from the customer, makes change, and issues a receipt for the purchase. At the end of the shift, the supervisor returns the cash register drawers containing the cash, checks, and credit cards receipts to the treasury clerk and signs a log that he has handed in the cash drawers. The clerk later counts the cash and credit card sales. Using a stand-alone PC, he records the total sales amounts in the sales journal and the general ledger sales and cash accounts. The treasury clerk then prepares a deposit slip and delivers the cash, checks, and credit card vouchers to the local branch of the bank two blocks away from the market. Required a. Create a data flow diagram of the current system. b. Create a system flowchart of the existing system. c. Analyze the physical internal control weaknesses in the system. Model your response according to the six categories of physical control activities specified in the COSO internal control model. d. Describe the IT controls that should be in place in this system.arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Managerial AccountingAccountingISBN:9781337912020Author:Carl Warren, Ph.d. Cma William B. TaylerPublisher:South-Western College Pub
Principles of Accounting Volume 2AccountingISBN:9781947172609Author:OpenStaxPublisher:OpenStax CollegeBusiness/Professional Ethics Directors/Executives...AccountingISBN:9781337485913Author:BROOKSPublisher:Cengage
EBK CONTEMPORARY FINANCIAL MANAGEMENTFinanceISBN:9781337514835Author:MOYERPublisher:CENGAGE LEARNING - CONSIGNMENT
Accounting Information SystemsAccountingISBN:9781337619202Author:Hall, James A.Publisher:Cengage Learning,
Managerial Accounting
Accounting
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:South-Western College Pub
Principles of Accounting Volume 2
Accounting
ISBN:9781947172609
Author:OpenStax
Publisher:OpenStax College
Business/Professional Ethics Directors/Executives...
Accounting
ISBN:9781337485913
Author:BROOKS
Publisher:Cengage
EBK CONTEMPORARY FINANCIAL MANAGEMENT
Finance
ISBN:9781337514835
Author:MOYER
Publisher:CENGAGE LEARNING - CONSIGNMENT
Accounting Information Systems
Accounting
ISBN:9781337619202
Author:Hall, James A.
Publisher:Cengage Learning,