ADM 1340 Lecture Notes - Lecture 5: Three Steps, Gross Margin, Profit Margin

63 views7 pages

peartortoise481

17 Jun 2015

School

Department

Course

Professor

For unlimited access to Class Notes, a Class+ subscription is required.

ceruleanclam927 and 54 others unlocked

ADM 1340 Full Course Notes

Verified Note

42 documents

Document Summary

The operating cycle is longer for a merchandising company than it is for a service company. Operating cycle: the time that it takes to go from cash to cash in producing revenues. Service companies perform services as their primary source of revenue. The companies perform services for cash or for an account receivable. And then paying cash to employees performing service. Merchandising companies buy inventory to resell to customers. The companies have to purchase merchandise for cash or an account payable from suppliers. Confusion about merchandising companies and manufacturing companies: Retailers: merchandising companies purchase and sell directly to customers. Manufacturers: manufacturing companies produce goods for sale. It should be in a form ready for sale to customers. Income measurement process (the following content focuses on merchandising companies): Sales revenue: the main source of revenue is from the sale of merchandise. Cost of goods sold: the total cost of merchandise sold in a period.

Related Questions

12 ACCOUNTING QUESTIONS

4. Using a perpetual inventory system, the buyer'sjournal entry to record the return of merchandise purchased onaccount includes a:

Select one:

A. Credit to Cost of Goods Sold

B. Credit to Accounts Payable

C. Credit to Purchase Returns

D. Credit to Inventory

6.Using a perpetual inventory system, the buyerâsjournal entry to record the payment for merchandise within thediscount period includes a:

Select one:

A. Debit to Accounts Payable

B. Debit to Cost of Goods Sold

C. Debit to Purchases

D. Debit to Inventory

7.Which of the following statements regarding cost flows istrue?

Select one:

Cost of goods available for sale is equal to beginning inventoryminus cost of goods purchased.

CGAS = beginning inventory minus ending inventory.

Cost of goods available for sale is equal to beginning inventoryplus cost of goods purchased.

CGAS = cost of goods sold minus cost of goods purchased.

10. Using a perpetual inventory system, the buyerâsjournal entry to record the purchase of merchandise on creditincludes a:

Select one:

A. Debit to Inventory

B. Debit to Freight In

C. Debit to Cost of Goods Sold

D. Debit to Purchases

11. Which of the following is not shown in thestatement of stockholder's equity?

Select one:

A. Unearned revenue

B. Common stock

C. Retained earnings

D. Dividends

13. Using a perpetual inventory system, the sellerâsjournal entry to record the sale of merchandise on account includesa:

Select one:

A. Debit to Accounts Receivable

B. Credit to Cost of Goods Sold

C. Credit to Purchases

D. Debit to Inventory

14. A merchandising company's multi-step income statementdiffers from that of a service company in what way?

Select one:

A service company does not include a line for cost of goodssold.

A service company has a line for selling expenses whereas amerchandising company does not.

There is no difference.

A merchandising company will have a line for income fromoperations whereas a service company will not.

16.Using a perpetual inventory system, the sellerâs journalentry to record the return, by the buyer, of merchandise purchasedon account includes a:

Select one:

A. Credit to Purchase Returns

B. Debit to Cost of Goods Sold

C. Debit to Accounts Receivable

D. Debit to Sales and Allowances

20. For a firm that uses the perpetual inventory system, theSales Returns and Allowances account:

Select one:

A. Is not a contra account

B. Is not used

C. Is debited by the firm receiving returned goods from acustomer

D. Has a normal credit balance

21. Current assets are cash and other assets that will beconverted into cash or used up within:

Select one:

A. One year

B. The normal operating cycle of the business

C. The normal operating cycle of the business or one year,whichever is longer

D. The normal operating cycle of the business or one year,whichever is shorter

22. The balance sheet format that reports assets first and then,beneath the assets, reports the liabilities and stockholders'equity is called the:

Select one:

A. Account form

B. Report form

C. Stack form

D. Classified form

23. Safari Monkey Company sold $2,400,000 worth of merchandise,had $200,000 returned, and then the balance was received during the2% discount period.

What were the companyâs net sales?

Select one:

A. $1,800,000

B. $1,760,000

C. $2,156,000

D. $2,040,000

turquoisesea-lion93

____ 11. Which one of the following statements is incorrect?

a.	The accounting function should be separated from the custodianship of a company's assets.
b.	Certain clerical personnel in a company should be rotated among various jobs.
c.	The responsibility of receiving merchandise and paying for it usually should be given to one person.
d.	A company's personnel should given well-defined responsibilities.

____ 12. Which of the following is incorrect?

a.	The operating cycle always is one year in duration.
b.	The operating cycle sometimes is longer than one year in duration.
c.	The operating cycle sometimes is shorter than one year in duration.
d.	The operating cycle is a concept applicable both to manufacturing and retailing enterprises.

____ 13. When the allowance method of recognizing bad debt expense is used, the entry to record the write-off of a specific uncollectible account would decrease

a.	allowance for doubtful accounts.
b.	net income.
c.	net realizable value of accounts receivable.
d.	working capital.

____ 14. On January 1, 2014, Kyle Corporation established a petty cash fund of $400. On December 31, 2014, the petty cash fund was examined and found to have receipts and documents for miscellaneous expenses amounting to $364. In addition, there was cash amounting to $44. What entry would be required to record replenishment of the petty cash fund on December 31, 2014?

a.	Petty Cash.................... 364 Cash Short and Over......... 8 Cash........................ 356
b.	Miscellaneous Expense......... 364 Cash Short and Over......... 8 Petty Cash.................. 356
c.	Miscellaneous Expense......... 364 Cash Short and Over......... 8 Cash........................ 356
d.	Miscellaneous Expense......... 356 Cash Short and Over......... 8 Cash........................ 364

____ 15. In preparing a bank reconciliation, interest paid by the bank on the account is

a.	added to the bank balance.
b.	subtracted from the bank balance.
c.	added to the book balance.
d.	subtracted from the book balance.

emeraldprairie-dog191

Question 1

In order to compete effectively in todayâs increasingly globalised market, many companies have used features related to environmental sustainability to âwinâ new customers.

In relation to the company you work in or one that you are familiar with,

(a) Explain the term âsustainable business strategyâ and how this strategy relates to operations and supply chain management.

(8 marks)

(b) Identify an operations and supply chain-related "disruption" that impacted the company. What could the company have done to minimise the impact of this type of disruption prior to it occurring?

(7 marks)

(c) You have recently been appointed as the production manager of the company. To meet the demands of its global market, the company has set up production locations in two different countries. One is located in the USA while the other is located in a Southeast Asian country. You want to find out what is the productivity of the current operations at the two production locations. You have obtained the following results from the production supervisor (Table 1).

Table 1

*FC â Foreign Currency where $1 = FC 10

	USA	Southeast Asia
Sales (units)	100,000	20,000
Labour (hours)	20,000	15,000
Raw materials (currency)	$20,00	*FC 20,000
Capital equipment (hours)	60,00	5,000

(i) Calculate the multifactor productivity figures for labour and capital together. Do the results make sense?

(5 marks)

(ii) Calculate raw material productivity figures (units/$) and explain any differences in these figures.

(5 marks)

Question 2

(a) A Japanese fast food restaurant, OiShi is concerned about its ability to provide quality service as they continue to grow and attract more customers. Its management has collected data from Friday and Saturday nights, its busiest times of the week. During these nights, about 75 customers arrive per hour for service. Given the number of tables and chairs, and the typical time it takes to serve a customer, the restaurant can serve on average about 100 customers per hour.

Analyse the restaurant service process in these nights where the data are collected and comment on whether the services are in the zone of service, the critical zone, or the zone of non-service? (Refer to Figure 2 when providing your answers)

Figure 2: Relationship between the Rate of Service Utilisation (r) and service quality

(4 marks)

The management anticipates that the restaurantâs demand will double in one year as long as it can provide good service to its customers. How much will the restaurant have to increase its service capacity to stay out of the critical zone?

(4 marks)

(b) Describe the characteristics of service processes of a typical fast food restaurant based on your service encounters.

(10 marks)

(c) Examine the strategies to manage service encounters. You should provide details on any TWO (2) possible customer-introduced variability in the service processes and propose THREE (3) accommodating strategies to effectively address these variabilities.

(7 marks)

Question 3

(a) Consider your organisation or one that you are familiar with that plays a role in the global supply chain network. This organisation can be a supplier, manufacturer, distributor, logistics service provider or retailer in a particular industry (e.g. fast-moving consumer goods, electronics, oil and gas, and pharmaceuticals). In your answer, you should relate the concepts and strategies in operations and supply chain management to the work environment.

Explain how the aggregate operations plan can help match supply with demand and optimise operational costs in this organisation.

(4 marks)

Provide TWO (2) strategies that can be used to influence demand and TWO (2) strategies that can be used to adjust capacity to match demand.

(8 marks)

(b) The development of web-based tools has allowed companies to collaborate on a larger scale and perform its operations and supply chain activities with greater ease. Demonstrate how collaborative techniques can be used to forecast demand. You should provide details such as the various stages of activities that are involved.

(8 marks)

Discuss the risks of being too reliant on the internet as a collaboration tool in demand forecasting and management.

(5 marks)

Question 4

Kee Wah Store sells a variety of exquisite European cookies and candies to the consumer market. The demand for cookies and candies is volatile and varies from month to month. The store orders from its suppliers. The lead time is normally one month, mainly consisting of the sea freight transportation time from Europe to Singapore. The store keeps a certain level of inventory at its warehouse.

The total demand for chocolate cookies is estimated to be 7,200 packets a year. The chocolate cookie packet is sourced from the supplier at $5 per packet and is sold to the end consumer at $15 per packet. It costs $100 to place an order to the supplier, and costs 20% of unit cost to store a packet of chocolate cookies for one year.

(a) Give FOUR (4) reasons why Kee Wah Store needs to maintain some inventory at its warehouse.

(8 marks)

(b) Examine the inventory situation for Kee Wah Store by applying the EOQ model to solve for order quantity and reorder point. What is the annual ordering cost, annual holding cost and total annual cost?

(10 marks)

(c) One supplier, Nee Ann Import Inc., approaches Kee Wah Store and proposes that it could shorten the lead time from one month to one week using airfreight.

What are the factors that Kee Wah Store needs to consider before deciding to accept or reject Nee Ann Importâs offer?

----- END OF PAPER -----

(7 marks)

jadeserval468

ADM 1340 Lecture Notes - Lecture 5: Three Steps, Gross Margin, Profit Margin

ADM 1340 Full Course Notes

Document Summary

Get access

Related Documents

ADM 1340 Chapter Notes - Chapter 5: Accounts Receivable, Perpetual Inventory, Debits And Credits

ADM 1340 Chapter Notes - Chapter 5: Cash Conversion Cycle, Accounts Receivable

ADM 1340 Chapter Notes - Chapter 5: Gross Margin, Perpetual Inventory, Gross Profit

Related Questions