Assume you are the warehouse manager for Vinnie’s Vinyls, a multi-location business specializing in vinyl records. Vinnies’s operates under a cost-based transfer structure and the warehouse supplies all stores with the records. The stores can purchase records only from the warehouse, and the warehouse can only sell to Vinnie’s stores. The manager of the West store has some concerns relating to the store’s financial performance and has asked for your help analyzing transfer costs. After calculating the operating income in dollars and the operating income percent, analyze the following financial information to determine costs that may need further investigation. (Hint: it may be helpful to perform a vertical analysis.)
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- Discuss how, as warehouse manager for Vinnies Vinyls, you view the different rate of allocated costs the warehouse is being charged compared to the West store. Describe the implications of this. What steps could you take to solve this discrepancy? What alternatives would you consider, assuming management is willing to consider making changes in the rate?arrow_forwardA local coffee shop has two major product lines—drinks and pastries. If the manager allocates common costs on any objective basis discussed in this chapter, the drinks are profitable, but the pastries are not. The manager is concerned that the supervisor at corporate headquarters will drop the pastries. The manager is concerned because a relative, who is struggling to make a go of a new business, supplies pastries to the coffee shop. The manager, therefore, decides to allocate all common costs to the drinks because “Drinks can afford to absorb these costs until we get the pastries line on its feet.” After assigning all common costs to drinks, both the drinks and pastries product lines appear to be marginally profitable. Consequently, corporate headquarters decides to continue the pastries line. What can we do to boost pastry sales?arrow_forwardA local coffee shop has two major product lines—drinks and pastries. If the manager allocates common costs on any objective basis discussed in this chapter, the drinks are profitable, but the pastries are not. The manager is concerned that the supervisor at corporate headquarters will drop the pastries. The manager is concerned because a relative, who is struggling to make a go of a new business, supplies pastries to the coffee shop. The manager, therefore, decides to allocate all common costs to the drinks because “Drinks can afford to absorb these costs until we get the pastries line on its feet.” After assigning all common costs to drinks, both the drinks and pastries product lines appear to be marginally profitable. Consequently, corporate headquarters decides to continue the pastries line. Required How would you recommend the manager allocate the common costs between drinks and pastries? You are the assistant manager and have been working with the manager on the allocation…arrow_forward
- The following situations describe decision scenarios that could use managerial accounting information: The manager of High Times Restaurant wishes to determine the price to charge for various lunch plates. By evaluating the cost of leftover materials, the plant manager of a precision tool facility wishes to determine how effectively the plant is being run. The division controller of West Coast Supplies needs to determine the cost of products left in inventory. The manager of the Maintenance Department of a large manufacturing company wishes to plan next year’s anticipated expenditures. For each situation, discuss how managerial accounting information could be used. b) What are the major differences between managerial accounting and financial accounting?arrow_forwardJorge Rivera is the purchasing agent for a large warehouse. He doesn't know anything about forklifts and so has not been asked by the warehouse manager to participate in the purchase selection process for six new replacement forklifts. Once the decision has been made, however, Jorge will draw up the purchase order. In this case, Jorge is most likely simply acting as a/an/the: A influencer decider C buyer D user Barrow_forwardSaurez Company, your client, manufactures paint. The company’s president, Maria Saurez, has decided to open a retail store to sell Saurez paint as well as wallpaper and other supplies that would be purchased from other suppliers. She has asked you for information about the conventional retail method of pricing inventories at the retail store. Instructions Prepare a report to the president explaining the retail method of pricing inventories. Your report should include the following points. a. Description and accounting features of the method. b. The conditions that may distort the results under the method. c. A comparison of the advantages of using the retail method with those of using cost methods of inventory pricing. d. The accounting theory underlying the treatment of net markdowns and net markups under the method.arrow_forward
- You are a newly hired accountant for Sushi Beeber, Inc., a retail company specializing in apparel for small pets. The company would like to expand its apparel line to include sweaters for cats. Sushi Beeber has found several manufacturers that offer competitive prices to ensure cost of goods sold is low. Because the company receives merchandise from different manufacturers and the cat sweaters will be commoditized, the company needs to develop an internal accounting system to keep track of inventory cost. You think that the weighted average cost method may help the company stay up-to-date with the inventory cost as purchase cost changes over time. Your task is to create a spreadsheet that can calculate the inventory cost based on purchases and sales for the month. To help you get started, the file already has a list of columns for you to fill out. Row 2 has the beginning inventory. Starting with row 3, you need to fill in each field so that you can find the updated inventory total…arrow_forwardYou are a newly hired accountant for Sushi Beeber, Inc., a retail company specializing in apparel for small pets. The company would like to expand its apparel line to include sweaters for cats. Sushi Beeber has found several manufacturers that offer competitive prices to ensure cost of goods sold is low. Because the company receives merchandise from different manufacturers and the cat sweaters will be commoditized, the company needs to develop an internal accounting system to keep track of inventory cost. You think that the weighted average cost method may help the company stay up-to-date with the inventory cost as purchase cost changes over time. Your task is to create a spreadsheet that can calculate the inventory cost based on purchases and sales for the month. See attached spreadsheet.-this has the information you need! The chart below is what I need to fill in. Inventory Weighted Date Purchase/Sale Total Cost Average Cost 1-Oct Purchase 1-Oct Sale 3-Oct…arrow_forwardYou are a newly hired accountant for Sushi Beeber, Inc., a retail company specializing in apparel for small pets. The company would like to expand its apparel line to include sweaters for cats. Sushi Beeber has found several manufacturers that offer competitive prices to ensure cost of goods sold is low. Because the company receives merchandise from different manufacturers and the cat sweaters will be commoditized, the company needs to develop an internal accounting system to keep track of inventory cost. You think that the weighted average cost method may help the company stay up-to-date with the inventory cost as purchase cost changes over time. Your task is to create a spreadsheet that can calculate the inventory cost based on purchases and sales for the month. See attached spreadsheet. nventory Weighted Date Purchase/Sale Total Cost Average Cost 1-Oct Purchase 1-Oct Sale 3-Oct Purchase 4-Oct Sale 4-Oct Sale 4-Oct Purchase 7-Oct Sale…arrow_forward
- ST is adistribution company which buys a product in bulk from manufacturers, repackages the product into smaller packs and then sells the packs to retail customers. ST’s customers vary in size and consequently the size and frequency of their orders also varies. Some customers order large quantities from ST each time they place an order. Other customers order only a few packs each time. The current accounting system of ST produces very basic management information that reports only the overall company profit. ST is therefore unaware of the costs of servicing individual customers. However, the company has now decided to investigate the use of Direct Customer Profitability Analysis (DCPA). ST would like to see the results from a small sample of customers before it decides whether to fully introduce DCPA. The information for two customers, and for the whole company, for the previous period was as follows:…arrow_forwardAssume you are the department B manager for Marley's Manufacturing. Marley's operates under a cost-based transfer structure. Assume you receive the majority of your raw materials from department A, which sells only to department B (they have no outside sales). After calculating the operating income in dollars and operating income in percentage, analyze the following financial information to determine costs that may need further investigation. The cost that needs further investigation is cost allocated from corporate. In Department A the percentage of cost allocated based on sales is 10% where as in Department B this is 29.41% based on sales. This needs further investigation beacuse of this cost there is operating loss in Department B. Income Statement Month ending August 31, 2019 Dept. A % Dept. B % Sales $22,000 100 $51,000 100 Cost of Goods Sold 10,560 48 26,520 52 Gross profit $11,440 52 $24,480 48 Utility expenses 1,000 4.55…arrow_forwardAssume you are the department B manager for Marley's Manufacturing. Marley's operates under a cost-based transfer structure. Assume you receive the majority of your raw materials from department A, which sells only to department B (they have no outside sales). After calculating the operating income in dollars and operating income in percentage, analyze the following financial information to determine costs that may need further investigation. The cost that needs further investigation is cost allocated from corporate. In Department A the percentage of cost allocated based on sales is 10% where as in Department B this is 29.41% based on sales. This needs further investigation beacuse of this cost there is operating loss in Department B. Marley's Manufacturing Income Statement Month ending August 31, 2018 Dept. A % Dept. B % Sales…arrow_forward
- Principles of Accounting Volume 2AccountingISBN:9781947172609Author:OpenStaxPublisher:OpenStax CollegeExcel Applications for Accounting PrinciplesAccountingISBN:9781111581565Author:Gaylord N. SmithPublisher:Cengage LearningManagerial AccountingAccountingISBN:9781337912020Author:Carl Warren, Ph.d. Cma William B. TaylerPublisher:South-Western College Pub