Accounting

Accounting - American National Curriculum questions asked by Filo students

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Question 1

Differential cost, sunk cost, opportunity cost: Differential cost, sunk cost, opportunity cost are the costs part of the managerial accounting . These costs are given more importance by the management to its internal evaluation of the product or products out come to seek remedy for critical business situation. To Explain: The differential, sunk, opportunity costs significance Solution: Differential, sunk, opportunity costs are the costs spent by the organization to increase its profit. Explanations: Differential cost is also known as Incremental cost, it can defined as . differential cost is used for modify the organization revenue activity by adding new machine or introducing new product line, this cost only suitable for existing organization. .Sunk cost is the cost previously incurred by the organization, can’t change or recovered through current decision making process but it can use as a reference to avoid the sunk cost in future.. .An Opportunity cost is the cost used by the organization to replace the present benefit for the best future benefit through proper decisions making.. Conclusion: Differential, sunk, opportunity costs comes under cost concepts, management could use these cost concepts in decision making for business success.

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Question 2

Contribution Margin: Contribution margin is the amount derived after deducting company’s variable expenses from its sales revenue. To Explain: The contribution margin Solution: Contribution margin is the amount derived after deducting company’s variable expenses from its sales revenue. Explanations: Contribution margin is the margin amount calculated by the company’s management for the decision-making process, it is used to know about single product capacity to generate sales revenue as well as its incurred variable expenses (direct and indirect items) before deducting fixed expenses. After getting contribution margin, management comes to know about the product is profitable or not, if not and found the reason is due to high level of variable expenses incurred, that lead to reduce the profit or arise to lose, then management plan to reduce the variable expenses. Conclusion: This calculation is purely used for organization internal purpose, so a third party or external people doesn’t involve.

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Question 3

Traditional format and contribution income statement: Income statement is prepared by the organization to derive the net profit, contribution income statement was prepared for cost classifications but both formats indicate same net profit, even though some difference in the cost classifications has existed in both income statements formats. To determine: The difference between the Traditional format and contribution income statement Solution: Traditional income statement was prepared for showing company financial status at the same time contribution income statement was prepared for management decision making. Explanations: Traditional format income statement used simple heading, there are no cost classifications to record the expense, in further it is presented for external people interest such as stakeholders, new investors, creditors, government, etc., to declare a current business financial position. A contribution format income statement has cost classification; it has multiple costs heading such as variable cost and fixed cost. This format is prepared for internal people interest such as operation managers, senior managers, cost managers and other related executives to make the proper plan to control the cost either variable or fixed or both and to identify which cost is directly related to product manufacturing process. So this format is considered as an effective decision-making tool in cost control division. Conclusion: Both income statements formats would give same net profit but both formats would prepare for various purpose.

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Question 4

Least-squares regression: The least-squares regression is a statistical tool to estimate the production costs. The least-squares regression uses an equation to graph the fixed and the variable costs along with the regression line. The meaning of the term least-squares regression.

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Question 5

Selling price: The pricing policies of a company while setting up the selling price of a product or a service must include the costs incurred in bringing the product to the market which also includes a certain percentage of profit. The costs to be covered by the selling price of the product.

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Question 6

Relative profitability: Relative profitability of business and its products/services is a measure of analysing its profits and earnings as compared to the expenses it is incurring. As to how the relative profitability of a product is determined in a volume trade-off decision.

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Question 7

Relative profitability: Relative profitability of a business and its products/services is a measure of analysing its profits and earnings as compared to the expenses it is incurring. The information needed to measure the relative profitability of the product.

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Question 8

Absolute profitability: The profitability that measures the impact of adding or leaving a particular business segment such a products, customers on the company’s overall profit earning capacity is known as absolute profitability. The information needed to measure the absolute profitability of a segment.

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Question 9

Mixed cost: Mixed cost is cost that includes both fixed cost and variable cost. It represents the total cost of an activity or production. Variable Cost: Variable cost is a cost that changes when the volume of production changes, in the same direction and in the same proportion. Fixed Cost: Fixed cost is a cost that remains constant irrespective of changes in the production volume. To Write: The general formula for a mixed cost and identify the variable cost and the fixed cost terms. Solution: The general formula for a mixed cost is given below: In the above-mentioned formula, ‘a’ represents the fixed cost and ‘b’ represents the variable cost per unit. Thus, the formula is mentioned and explained.

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Question 10

Small business: A business is categorised as small business based on the revenue and size of the business. The validity of the statement of a small business owner − .We have the best technology, the best products and the best people in the world. We have no constraints..

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Question 11

The meaning of relative profitability. Relative profitability: Relative profitability of business and its products/services is a measure of analysing its profits and earnings as compared to the expenses it is incurring.

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Question 12

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Question 13

Profitability: The profitability also known as the return on sales represents the net profit earned as a percentage of the total turnover. Relative profitability: Relative profitability of a business and its products/services is a measure of analysing its profits and earnings as compared to the expenses it is incurring. Absolute profitability: The profitability that measures the impact of adding or leaving a particular business segment such a products, customers on the company’s overall profit earning capacity is known as absolute profitability. With reference to the information given in the question, answer the following questions − Determine the reservations which should be cancelled if the sole objective of the business is to maximise profits. As per (1), determine the total profits earned. Assuming that it won’t be possible for Luxus Bakery to change the pricing of the wedding cakes, recommend the prices at which cakes should be sold in future. Give some creative ideas to be followed by Ms. Therau to keep both the customers and Regina happy while increasing the profits.

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Question 14

Profitability: The profitability also known as the return on sales represents the net profit earned as a percentage of the total turnover. Margin: Margin means the net profit earned by the business and revenue represents the total sales turnover of the business in a given period. The use of margin as the numerator and the use of revenue as the denominator in the formula of profitability.

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Question 15

Profitability: The profitability also known as return on sales represents the net profit earned as a percentage of the total turnover. From the information given in the question, determine the following- Whether there is sufficient required capacity of kiln to satisfy the demand. The production plan for the year to maximise the profits. The total contribution margin for the production plan proposed in (2). Incremental costs to be incurred to operate the kiln for more than 2000 hours . Minimum acceptable selling price of the new product − glazed Venetian bricks if its cost is $820 and would require 10 hours in the kiln per pallet. Is the commission of 5% of gross revenue to the salespersons motivating enough to sell the products most aggressively?

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Question 16

Profitability: The profitability also known as return on sales represents the net profit earned as a percentage of the total turnover. With reference to the information given in the question, answer the following questions − The ranks of the four customers in terms of their profitability Considering $25 per hour plus a commission of 1% of sales revenue is paid to the customer representatives, determine if they can be paid more if the four pharmacies given in the question are the customer representatives.

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Question 17

Minimum selling price: The minimum selling price of the product is the price at which the supplier is willing to sell the product. The minimum acceptable selling price for the new product line praline cappuccino product.

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Question 18

Profitability: The profitability also known as return on sales represents the net profit earned as a percentage of the total turnover. Margin: Margin means the net profit earned by the business. Revenue: Revenue represents the total sales turnover of the business in a given period. With reference to the details given in the question, determine the following − Is there sufficient capacity to satisfy demand of all products The optimal production for the year The total contribution margin for the production plan proposed

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Question 19

Net present value : The net present value represents the earnings as a difference between the present value of cash outflows and the present value of cash inflows. The proposed rides the company should build this year

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Question 20

What is the major disadvantage of the high-low method?

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Accounting - American National Curriculum questions asked by Filo students

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