Principles of Accounting Volume 2
19th Edition
ISBN: 9781947172609
Author: OpenStax
Publisher: OpenStax College
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Transcribed Image Text:Rolls-Royce, the luxury automobile manufacturer, is considering a new
production process for its Ghost model. The current process incurs variable costs
of £80,000 per unit and fixed costs of £15 million per year. The proposed new
process would reduce variable costs to £70,000 per unit but increase fixed costs
to £18 million per year. Rolls-Royce expects to produce and sell 500 Ghost
models next year. What is the difference in total costs between the current and
proposed processes? At what production volume would the total costs of the
two processes be equal (i.e., the break-even point between the two processes)?
Which process should Rolls-Royce choose if they expect sales to grow in the
coming years? On December 31, 2023, Marriott International, the global
hospitality company, reported accounts receivable of $1.8 billion and an
allowance for doubtful accounts of $120 million on its balance sheet. During
2024, Marriott recorded credit sales of $15 billion and collected $14.7 billion
from customers. The company wrote off $90 million of uncollectible accounts
during the year. At the end of 2024, Marriott estimated that 3% of its
outstanding accounts receivable would be uncollectible. What is the amount of
bad debt expense Marriott should recognize for 2024? What will be the balance
of the allowance for doubtful accounts at the end of 2024? What will be the net
accounts receivable reported on Marriott's balance sheet as of December 31,
2024?
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