Introduction To Managerial Accounting
8th Edition
ISBN: 9781259917066
Author: BREWER, Peter C., Garrison, Ray H., Noreen, Eric W.
Publisher: Mcgraw-hill Education,
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Textbook Question
Chapter 7, Problem 8E
Deducing Changes ¡n Inventories LO7—3
Parker Products, Inc. is a manufacturer whose absorption costing income statement reported sales of $123 million and a net operating loss of$18 million. According to a CVI’ analysis prepared formanagement, the company’s break-even point is $115 million in sales.
Required:
Assuming that the CVP analysis is correct, is it likely that the company’s inventory level increased, decreased, or remained unchanged duringthe year? Explain.
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Students have asked these similar questions
16.
Quick assets P208,000
Acid test ratio 2.6 to 1
Current ratio 3.5 to 1
Net sales for the year P1,800,000
Cost of sales for the year P990,000
Average total assets P1,200,000
The company’s inventory balances at December 31 is?
The company’s asset turnover ratio for the year is?
3. Asset management ratios
Asset management ratios are used to measure how effectively a firm manages its assets, by relating the amount a firm has invested in a particular
type of asset (or group of assets) to the amount of revenues the asset is generating. Examples of asset management ratios include the average
collection period (also called the days sales outstanding ratio), the inventory turnover ratio, the fixed asset turnover ratio, and the total asset turnover
ratio.
Consider the following case:
Crockett Electronics has a quick ratio of 2.00x, $33,525 in cash, $18,625 in accounts receivable, some inventory, total current assets of
$74,500, and total current liabilities of $26,075. The company reported annual sales of $200,000 in the most recent annual report.
Over the past year, how often did Crockett Electronics sell and replace its inventory?
8.01x
8.95x
2.86x
9.85x
The inventory turnover ratio across companies in the electronics industry is 9.845x. Based on this information,…
Measuring profitability based
on different inventory and
amortization methods
1. Net income: Zastre Associates,
$116,000
12000
27000
DP10-1
Suppose you are considering investing in two businesses, Zastre Associates and Chen Co.
The two companies are virtually identical, and both began operations at the beginning of
2020. During the year, each company purchased inventory as follows:
Jan. 10
Mar. 11
Jul. 9
Oct. 12
Totals
12,000 units at $7 = $ 84,000
5,000 units at $9
45,000
10,000 units at $10
100,000
12,000 units at $11
132,000
$361,000
39,000
=
-
During 2020, both companies sold 30,000 units of inventory.
In early January 2020, both companies purchased equipment costing $400,000 that had
a five-year estimated useful life and a $40,000 residual value. Zastre Associates uses the first-
in, first-out (FIFO) method for its inventory and straight-line amortization for its equipment.
Chen Co. uses the weighted-average method for inventory and DDB amortization. Both
companies' trial balances…
Chapter 7 Solutions
Introduction To Managerial Accounting
Ch. 7 - What is the difference between absorption costing...Ch. 7 - Are selling and administrative expenses treated as...Ch. 7 - Explain how fixed manufacturing overhead costs are...Ch. 7 - What are the arguments in favor of treating fixed...Ch. 7 - What are the arguments in favor of treating fixed...Ch. 7 - Prob. 6QCh. 7 - If the units produced exceed the units sold, which...Ch. 7 - Prob. 8QCh. 7 - Prob. 9QCh. 7 - How does Lean Production reduce or eliminate the...
Ch. 7 - Prob. 11QCh. 7 - Prob. 12QCh. 7 - Distinguish between a traceable fixed cost and a...Ch. 7 - Explain how the contribution margin differs from...Ch. 7 - Why aren’t common fixed costs allocated to...Ch. 7 - How is it possible for a fixed cost that ¡s...Ch. 7 - Should a company allocate its common fixed costs...Ch. 7 - Prob. 1AECh. 7 - Prob. 2AECh. 7 - Prob. 3AECh. 7 - Diego Company manufactures one product that is...Ch. 7 - Prob. 2F15Ch. 7 - Prob. 3F15Ch. 7 - Prob. 4F15Ch. 7 - Diego Company manufactures one product that is...Ch. 7 - Prob. 6F15Ch. 7 - Diego Company manufactures one product that is...Ch. 7 - Prob. 8F15Ch. 7 - Diego Company manufactures one product that is...Ch. 7 - Prob. 10F15Ch. 7 - Prob. 11F15Ch. 7 - Prob. 12F15Ch. 7 - Prob. 13F15Ch. 7 - Diego Company manufactures one product that is...Ch. 7 - Diego Company manufactures one product that is...Ch. 7 - Prob. 1ECh. 7 - Variable Costing Income Statement; Explanation of...Ch. 7 - Reconciliation of Absorption and Variable Costing...Ch. 7 - Prob. 4ECh. 7 - Prob. 5ECh. 7 - Prob. 6ECh. 7 - Prob. 7ECh. 7 - Deducing Changes ¡n Inventories LO7—3 Parker...Ch. 7 - Variable and Absorption Costing Unit Product Costs...Ch. 7 - Prob. 10ECh. 7 - Segmented Income Statement L07—4 Wingate Company,...Ch. 7 - Prob. 12ECh. 7 - Prob. 13ECh. 7 - Variable Costing Unit Product Cost and Income...Ch. 7 - Absorption Costing Unit Product Cost and Income...Ch. 7 - Working with a Segmented Income Statement;...Ch. 7 - Prob. 17ECh. 7 - Prob. 18PCh. 7 - Variable Costing Income Statement; Reconciliation...Ch. 7 - Variable and Absorption Costing Unit Product Costs...Ch. 7 - Segment Reporting and Decision-Making L07—4 Vulcan...Ch. 7 - Prob. 22PCh. 7 - Absorption and Variable Costing; Production...Ch. 7 - Companywide and Segment Break-Even Analysis;...Ch. 7 - Prepare and Interpret Income Statements; Changes...Ch. 7 - Prob. 26PCh. 7 - Variable and Absorption Costing Unit Product Costs...
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