Professor Kilchenmann recently started a business called Accounting in a Box to sell two new accounting board games. The first is a game related to financial accounting called “Debit or Credit, the Home Game.” The second is a game related to managerial accounting called “Fixed or Variable (and Sometimes Mixed), a Game for Friends.” He is unsure about how to distribute the games to his potential customers, so he has decided to sell each board game using a different sales model. For Debit or Credit, he has decided to sell directly to local retailers. For Fixed or Variable (and Sometimes Mixed), he has decided to hire a team of salespeople to sell the game door-to-door. Direct labor workers are paid $25 per hour. He has made the following estimates pertaining to each game for April 2023: Debit or Credit Fixed or Variable ... Estimated sales (in units) 5,000 7,500 Direct materials cost per unit $5.25 $6.25 Direct labor required to make one unit (in hours) 0.30 0.4 Overhead is applied based on direct labor hours. He has also made the following estimates pertaining to the month of April 2023: Estimated total overhead (for the month): $11,250 Estimated direct labor hours: 4,250 Other Assumptions: The selling price is determined using cost-plus pricing (based on manufacturing cost) with a markup of 50%. Salespeople are paid entirely on commissions and are paid $2.60 per unit sold. Advertising costs are fixed at $5,000 for the month. Administrative costs are fixed at $10,000 for the month Answer the following: The salespeople think that Fixed or Variable (and Sometimes Mixed) is overpriced and that they could sell 2,500 additional units if the price of the game was reduced by $5.00 per unit. What would be the change in net operating income if this plan is adopted? Would you recommend that this plan be adopted?
The Effect Of Prepaid Taxes On Assets And Liabilities
Many businesses estimate tax liability and make payments throughout the year (often quarterly). When a company overestimates its tax liability, this results in the business paying a prepaid tax. Prepaid taxes will be reversed within one year but can result in prepaid assets and liabilities.
Final Accounts
Financial accounting is one of the branches of accounting in which the transactions arising in the business over a particular period are recorded.
Ledger Posting
A ledger is an account that provides information on all the transactions that have taken place during a particular period. It is also known as General Ledger. For example, your bank account statement is a general ledger that gives information about the amount paid/debited or received/ credited from your bank account over some time.
Trial Balance and Final Accounts
In accounting we start with recording transaction with journal entries then we make separate ledger account for each type of transaction. It is very necessary to check and verify that the transaction transferred to ledgers from the journal are accurately recorded or not. Trial balance helps in this. Trial balance helps to check the accuracy of posting the ledger accounts. It helps the accountant to assist in preparing final accounts. It also helps the accountant to check whether all the debits and credits of items are recorded and posted accurately. Like in a balance sheet debit and credit side should be equal, similarly in trial balance debit balance and credit balance should tally.
Adjustment Entries
At the end of every accounting period Adjustment Entries are made in order to adjust the accounts precisely replicate the expenses and revenue of the current period. It is also known as end of period adjustment. It can also be referred as financial reporting that corrects the errors made previously in the accounting period. The basic characteristics of every adjustment entry is that it affects at least one real account and one nominal account.
Professor Kilchenmann recently started a business called Accounting in a Box to sell
two new accounting board games. The first is a game related to financial accounting
called “Debit or Credit, the Home Game.” The second is a game related to
accounting called “Fixed or Variable (and Sometimes Mixed), a Game for Friends.” He
is unsure about how to distribute the games to his potential customers, so he has
decided to sell each board game using a different sales model. For Debit or Credit, he
has decided to sell directly to local retailers. For Fixed or Variable (and Sometimes
Mixed), he has decided to hire a team of salespeople to sell the game door-to-door.
Direct labor workers are paid $25 per hour. He has made the following estimates
pertaining to each game for April 2023:
|
Debit or Credit |
Fixed or Variable ... |
|
|
Estimated sales (in units) |
5,000 |
7,500 |
|
Direct materials cost per unit |
$5.25 |
$6.25 |
|
Direct labor required to make one unit (in hours) |
0.30 |
0.4 |
estimates pertaining to the month of April 2023:
Estimated total overhead (for the month): $11,250
Estimated direct labor hours: 4,250
Other Assumptions:
- The selling price is determined using cost-plus pricing (based on
manufacturing cost ) with a markup of 50%. - Salespeople are paid entirely on commissions and are paid $2.60 per unit sold.
- Advertising costs are fixed at $5,000 for the month.
- Administrative costs are fixed at $10,000 for the month
Answer the following:
- The salespeople think that Fixed or Variable (and Sometimes Mixed) is overpriced and
that they could sell 2,500 additional units if the price of the game was reduced by $5.00
per unit. What would be the change in net operating income if this plan is adopted?
Would you recommend that this plan be adopted?
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