[Question 2] Happy Feet buys hiking socks for $6 a pair and sells them for $10. Management budgets monthly fixed costs of $12,000 for sales volumes between 0 and 12,000 pairs. Requirements Consider each of the following questions separately by using the foregoing information each time. 1. Calculate the breakeven point in units. 2. Happy Feet reduces its selling price from $10 a pair to $8 a pair. Calculate the new breakeven point in units. 3. Happy Feet finds a new supplier for the socks. Variable costs will decrease by $1 a pair. Calculate the new breakeven point in units.
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.
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![[Question 2]
Happy Feet buys hiking socks for $6 a pair and sells them for $10. Management budgets
monthly fixed costs of $12,000 for sales volumes between 0 and 12,000 pairs.
Requirements
Consider each of the following questions separately by using the foregoing information
each time.
1.
Calculate the breakeven point in units.
2.
Happy Feet reduces its selling price from $10 a pair to $8 a pair. Calculate the
new breakeven point in units.
3.
Happy Feet finds a new supplier for the socks. Variable costs will decrease by
$1 a pair. Calculate the new breakeven point in units.
4.
Happy Feet plans to advertise in hiking magazines. The advertising campaigns
will increase total fixed costs by $2,000 per month. Calculate the new breakeven point
in units.
In addition to selling hiking socks, Happy Feet would like to start selling sports socks.
Happy Feet expects to sell one pair of hiking socks for every three pairs of sports
socks. Happy Feet will buy the sports socks for $4 a pair and sell them for $8 a pair.
Total fixed costs will stay at $12,000 per month. Calculate the breakeven point in
units for both hiking socks and sports socks.
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