BUS 630 Week 4 Assignment Chester & Wayne

Chester & Wayne

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BUS 630: Managerial Accounting

Instructor

date

Chester & Wayne

REFERENCE

• “Profit is an overall measure of how well an organization is doing” (Schneider, 2012). “A profit variance then is the difference between the actual net income andthe planned net incomes for the same period” (Schneider, 2012). “The causes of such a variance are related to the   various elements that make up net income: revenue, cost of goods sold, and operating expenses” (Schneider, 2012). Gross margin are the remaining funds after all expenses have been deducted from the entire revenue. “Understanding and monitoring gross margins can also help business owners avoid pricing problems, losing money on sales, and ultimately stay in business” (Beasley, 2013). If the gross margin shrinks the company will have to increase borrowing from the bank in November and December.
• “One aspect has remained unchanged, perfect performance is difficult to achieve, with many possibilities of stock outs and other failures which negatively impact performance” (Voss 2005). “In pursuit of higher service levels and improved performance, many firms have begun to examine their internal functions to discover logistics opportunities yet to be leveraged” (Voss, 2005). Stock outs are when the product is not available for consumers to purchase. In most instances a stock out situation will not have a cost to the organization. “In some cases supply contracts for certain goods and services will have a penalty clause which penalizes the supplier if it cannot deliver the product or service, or a minimum quantity of such” (Product stock outs, n.d). “This is common when product stock outs incur large financial losses to the customer and subsequent customers along the supply chain” (Product stock outs, n.d). Increasing the inventory can be ideal and must be carefully scheduled when considering space allocation and budget.
• A change in accounts receivables can increase the need for borrowing. If a company changes the policy for discounts can have an adverse effect on cash flow. Therefore the discount given to customers who pay before the bill is due is a necessity. The interest rate on funds that are borrowed can tie up funds in the bottom line. So the discounts afforded to customer would be a mistake if discontinued. The last resort for a company that is not expanding is to borrow money to pay for expenses that have incurred. The increase in the discount is not a good idea as the gross margin is not high.

Beasley, C. (2013, January 09). Understanding gross margin and how it can make or break your

startup. Retrieved from http://www.sba.gov/community/blogs/community-blogs/small-

business-cents/understanding-gross-margin-and-how-it-can-make-

Product stockouts. (n.d.). Retrieved February 25, 2016, from http://www.leanmanufacture.net/kpi/stockout.aspx

Schneider, A. (2012). Managerial accounting: Decision making for the service and manufacturing sectors. San Diego, CA: Bridgepoint Education.

Voss, D. B., Calantone, R. J., & Keller, S. B. (2005). Internal service quality. International Journal of Physical Distribution & Logistics Management, 35. Retrieved from http://search.proquest.com.proxy-library.ashford.edu/docview/232593330?accountid=32521

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