The table represents the breakdown of cost structure, which is constructed based on the information of Zara case. What is the worst interpretation regarding the table below? Representative Competitor Zara Posted Selling Price 100.0 100.0 -Markdown -10.5 -2.6 Retail Selling Price (RSP) =89.5 =97.4 - Manufacturing Cost -44.8 -51.1 Gross Margin =44.7 =46.3 - Advertising -3.1 -0.3 Advertising-adjusted Margins =41.6 =46.3 (a) Zara has the lower markdown and advertising cost than its competitors because of its entry-timing decision (i.e., entering the market later until the demand uncertainty is substantially resolved). (b) Zara has higher manufacturing cost than its competitors because of its speed decision (i.e., shorter cycle from design to retail). (c) Zara realizes its cost leadership because the cost decreases in markdown and advertising are greater than the cost increases in manufacturing cost. (d) Zara realizes its cost leadership because of its speed decision, not because of its entry-timing decision.

The table represents the breakdown of cost structure, which is constructed based on the information of Zara case. What is the worst interpretation regarding the table below? Representative Competitor Zara Posted Selling Price 100.0 100.0 -Markdown -10.5 -2.6 Retail Selling Price (RSP) =89.5 =97.4 - Manufacturing Cost -44.8 -51.1 Gross Margin =44.7 =46.3 - Advertising -3.1 -0.3 Advertising-adjusted Margins =41.6 =46.3 (a) Zara has the lower markdown and advertising cost than its competitors because of its entry-timing decision (i.e., entering the market later until the demand uncertainty is substantially resolved). (b) Zara has higher manufacturing cost than its competitors because of its speed decision (i.e., shorter cycle from design to retail). (c) Zara realizes its cost leadership because the cost decreases in markdown and advertising are greater than the cost increases in manufacturing cost. (d) Zara realizes its cost leadership because of its speed decision, not because of its entry-timing decision.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Contribution Margin, Break-Even Sales, Cost-Volume-Profit Chart, Margin of Safety, and Operating Leverage Belmain Co. expects to maintain the same inventories at the end of 20Y7 as at the beginning of the year. The total of all production costs for the year is therefore assumed to be equal to the cost of goods sold. With this in mind, the various department heads were asked to submit estimates of the costs for their departments during the year. A summary report of these estimates is as follows: Estimated Estimated Variable Cost Fixed Cost (per unit sold) Production costs: Direct materials $50.00 Direct labor 30.00 Factory overhead $350,000 6.00 Selling expenses: Sales salaries and commissions 340,000 4.00 Advertising 116,000 Travel 4,000 Miscellaneous selling expense 2,300 1.00 Administrative expenses: Office and officers' salaries 325,000 Supplies 6,000 4.00 Miscellaneous administrative expense 8,700 1.00 Total $1,152,000 $96.00 It is expected that 12,000 units will be sold at a price…
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Current Attempt in Progress Some financial information for each of three companies is reflected below in columns A, B, and C. Use your knowledge of CVP relationships to fill in the missing pieces numbered (1) through (9). Consider each company (i.e., column) separately. (Round variable cost per unit and contribution margin ratio to 2 decimal places, e.g. 0.24.) Selling price Total fixed costs Sales volume (units) Variable cost/unit Operating income Tax rate After-tax profit Contribution margin ratio A $6 $13,100 29,000 $40,840 (1) % (2) $28,588 (3) B $800 2,500 $384 25% $684,375 (4) (5) (6) с $389,000 $30.24 $229,240 40% 0.64
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am. 132.
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