When running a company operational expenses can either sink your business or allow it to swim. The most common operational expenses are labor, paper costs, and advertising expenses, but with streamlining and budgeting these appropriately profit margins can increase. Bobby Scott stated, “Operating expenses are funds that are used to operate the sportswear business.” There are several operating expenses in a business, such as: labor, paper costs, and advertising.. Labor is one area to cut operating expenses, but this can cause morale killer in company. So instead of cutting the labor maximize the potential of the employees and cut the ones not operating to the highest standards. In the Journal of Management in Engineering, it is stated “one of the most important factors in the success of a professional firm is the way that individuals within the organization interact and form highly efficient teams to produce high-quality products.” A smart concept to allow growth for the employees is to offer an “open management” policy. This concept allows the associate to speak up about any problem they may encounter. Also everything is kept out in the open for the employees and at the end of the year they are rewarded with a bonus based on their contribution to the company. By using this concept there is a lower turnover rate, which in turn, lower the budget for training new employees. Today’s digital age offers another way to cut operational expenses in paper cost and advertising. By converting your purchases to an electronic format and the human resources forms also in the digital form will lower paper cost by not needing to print out receipts and online catalogs instead of paper ones allows the company to reach more customers than a catalog would have and makes the ordering process more efficient for the customer. Schulz stated, “We need to provide a vehicle that makes it just as simple if not more so, yet providing customers with more data so they can make a more informed decision." As a company they could hire a third party, like Millstar, to control all your online process for a low price. As far as advertising social networks are the most efficient way to reach todays
Chapter 3 Selected Solutions
12. a.,b. Note: Because depreciation expense is already included in various costs it is not reported as separate line in the calculation of earnings before interest and taxes (EBIT) or calculation of net earnings (which is also called net income)
Cost of sales (6,500)
General and admin expenses ( 1,000)
Interest expense (500)
Taxable income 2,000
Taxes (35%) (700)
Net earnings $ 1,300…
Test of a reportable segment where its segment assets are 10% or more of the combined assets of all operating segments.
Association of cause and effect
Costs recognized as expenses on the basis of a direct association with specific revenues; some transactions result simultaneously in both a revenue and an expense.
Capital maintenance concept
A corporatio’s net income for a period of time is the amount that it could distribute to shareholders without depleting the capital the shareholders have…
statement treats all cost of sales as variable costs. The selling, general and administrative expenses shown on the absorption income statement have been broken down into variable and fixed components in the contribution format income statement.
The Distribution and Transport expenses and the Sales Commissions were the variable selling costs on the contribution format income statement. The sum of these two expenses according to the absorption income statement on page 50 is €103,561 and €114,309 in 2004…
International Accounting Standards Board (IASB)
•IASB issues International Financial Reporting Standards
–All new standards are named IFRS–IASC (prior Board) issued International Accounting Standards (IAS); many are still effective–IAS and IFRS are now collectively referred to as IFRS
IASB •Currently15 board members; independent •One additional member will be added by 2012 IFRS Currently there are:•41 IASs 9 IFRSs
Nearly 120 nations currently permit or require the use of IASB standards…
successful operation of a business.
Revenue is the amounts earned from the sale of goods or services during the routine operation of the business.
Expenses are the costs of items or services used up in the routine operation of the business
Drawing shows that owner’s withdrawals for personal used does not appear on the Income Statement
Purpose of Expanding The Ledger is to provide essential information about the progress of the business
Net Income is the difference between revenue and expenses when…
equity at a given point in time.
An income statement, also known as a statement of comprehensive income, statement of revenue & expense, P&L or profit and loss report, reports on a company's income, expenses, and profits over a period of time. A profit and loss statement provides information on the operation of the enterprise. These include sales and the various expenses incurred during the stated period.
A statement of cash flows reports on a company's cash flow activities, particularly its operating…
American Corporation AnalysisAmerican Corporation AnalysisNetflix primary source of liquidity in 2012 and 2013 has been from operation. Operations mostly consist of current content library net, depreciation of property and equipment and stock-based compensation related to the issuance of common stock. In 2012 the total current assets were 2,240,791 billion and 3,058,763 billion in 2013. The total current liabilities in 2012 were 1,366,847 billion and 2,154,203 billion in 2013. The current ratio in…
period? (b) What was the cash used for during the period? and (c) What was the change in the cash balance during the period?
3. The three activities are:
Operating activities include the cash effects of transactions that create revenues and expenses and thus enter into the determination of net income.
Investing activities include: (a) purchasing and disposing of investments and productive long-lived assets and (b) lending money and collecting loans.
Financing activities include: (a) obtaining…
material used in the manufacture of a product (for manufacturing operations only), the cash outlay for merchandise inventory (for merchandisers such as wholesalers and retailers), or the supplies used in the performance of a service.
7. Direct labor is the labor required to manufacture a product (for manufacturing operations only) or to perform a service.
8. Overhead is all fixed and variable expenses required for the operations of the business.
9. Marketing/sales is all salaries, commissions…
can begin its operations.
___________________ - Amounts earned from the sale of products (sales revenue, service revenue, and interest revenue).
________________ - Goods available for sale to customers.
Operating Activities (cont.):
_____________ - Right to receive money from a customer, in the future, as the result of a sale.
_____________- cost of assets consumed or services used. (cost of goods sold, selling, marketing, administrative, interest, and income taxes expense).