Cost Accounting (15th Edition)
15th Edition
ISBN: 9780133428704
Author: Charles T. Horngren, Srikant M. Datar, Madhav V. Rajan
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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Chapter 20 Solutions
Cost Accounting (15th Edition)
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 - Prob. 20.16ECh. 20 - Prob. 20.17ECh. 20 - Prob. 20.18ECh. 20 - Prob. 20.19ECh. 20 - Prob. 20.20ECh. 20 - Prob. 20.21ECh. 20 - Prob. 20.22ECh. 20 - Prob. 20.23ECh. 20 - Prob. 20.24ECh. 20 - Prob. 20.25PCh. 20 - Prob. 20.26PCh. 20 - Prob. 20.27PCh. 20 - Prob. 20.28PCh. 20 - Prob. 20.29PCh. 20 - Supply-chain effects on total relevant inventory...Ch. 20 - Prob. 20.31PCh. 20 - Prob. 20.32PCh. 20 - Prob. 20.33PCh. 20 - Prob. 20.34PCh. 20 - Lean accounting. Reliable Security Devices (RSD)...Ch. 20 - Prob. 20.36P
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- How would reported income differ if LIFO rather than FIFO were used when purchase prices are rising? When purchase prices are falling?arrow_forwardHow do you calculate the markup on cost of goods sold? Is the markup pure profit? Explain.arrow_forwardSteadily increasing cost of goods sold as a percentage of net revenues is an indication ofa. decreasing earnings quality.b. increasing earnings quality.c. financial statement fraud.d. increasing production efficiencies.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_forwardHow is the profit margin on sales calculated?arrow_forwardgross profit margin (gross profit/sales) is an important determinant of NOPAT. identify two factors that can cause gross profit margin to decline. is a a reduction in the gross profit margin always bad news? Explain.arrow_forward
- How much is the Net Purchases? how much is the Net Cost of Goods Purchased? how much is the Cost of Sales?arrow_forwardGross profit will result if: O Sales revenues are greater than operating expenses. Operating expenses are greater than cost of goods sold. Sales revenues are greater than cost of goods sold. O Operating expenses are less than net income.arrow_forwardMay I ask for an explanation to the question for a better understanding. Thank you! Gross profit may vary due to one or a combination of the following except: a. change in sales mix b. change in quantity sold. c. change in units produced d. change in production costs e. change in unit selling prices.arrow_forward
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