ACTG 2300 Lecture 7: Day 7 Notes

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Day 7 1/27
Company A
NIKE
They buy a finished shoe, so TVC is high due to costs!
Company B
ADIDAS
They produce their own shoes, so TFC is high due to manufacturing
Exercise 5-10 (p. 220)
Variable expenses are different
Direct variable cost
Direct because specific to certain game
Variable because changes with units
EX: paying programmers that only worked on 1 game
Fixed cost
Indirect cost cant directly trace the cost to which game
EX: Rent for buildings that had space to work on BOTH games
Return on Sales (ROS) = TR / OI = 100,000 / 6,000
Segment Reporting
Segment: Part of your business (may be defined as products) but may be a
geographical area, a customer, a distribution channel, store, country, etc
o If you are company in US, must report some information about
segments
o Free to identify what the segments are can report numbers by
customer, product, etc.
Often done through revenues
o EX: Our revenues are 100,000. And 30,000 was from Claimjumper and
70,000 from Makeover
Break down the total into segments by tracing the cost directly to the various
segments
1. CM Ratio = TCM / TR = UCM / P = (TCM/V) / P = (P-UVC) / P
TCM = TR TVC = (P*V)-(UVC*V)
TR = P * V
CM Ratio = 30,000 / 100,000 = 0.3
30% of revenues goes towards covering the TFC
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