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Essay / Research Paper Abstract
A 5 page paper assessing two management accounting cases. One addresses whether a one-location retail establishment should eliminate one department and expand another, one addresses the inability of a company’s board to determine where the company’s profits and losses lie due to inept accounting. Includes 3 tables. Bibliography lists 1 source.
Page Count:
5 pages (~225 words per page)
File: CC6_KSacctMgmtDecide.rtf
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Unformatted sample text from the term paper:
Decorating is a one-location business selling paint, paint supplies, carpeting and wallpaper. Overall, the business has been profitable over the years, but recently the wallpaper segment has been operating
at a loss. Table 1 illustrates recent results. Table 1. Recent Departmental Results Paint and Supplies Carpeting Wallpaper Sales 380,000 460,000 140,000 Variable Costs 228,000
322,000 112,000 Fixed Costs 56,000 75,000 45,000 Total Costs 284,000 397,000 157,000 Operating Income (loss) 96,000 63,000 (17,000)
These results return a total net profit of $142,000, but Tipton management wonders if eliminating the wallpaper department will be a positive change for the company.
Tipton anticipates that eliminating wallpaper sales will negatively affect paint and paint supply sales by 20 percent. Remodeling the wallpaper area to expand into carpet will cost $12,400, and
Tipton believes that additional advertising to promote its expanded carpet area will cost $25,000. Tipton will be able to eliminate 40 percent of wallpapers fixed costs but will retain
60 percent, which will be assigned to the carpet department. Table 2 contains results of these changes. Table 2. Proposed Changes and Responses Paint and
Supplies Carpeting 1st year Carpeting 2nd year Sales 304,000 580,000 580,000 Remodeling - 12,400 - Variable Costs 228,000 322,000 322,000 Fixed Costs 56,000 102,000 102,000 Advertising Increase - 25,000 -
Total Costs 284,000 461,400 424,000 Operating Income (loss) 20,000 118,600 156,000 In the first year
after instituting these changes, Tipton can expect a net profit of $138,600, $3,400 less than it currently nets from operations including wallpapers loss. This is only true for the
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