The percentage of denominator level at which the plant was operating in 2014.

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Answer 1

Question

Chapter 9, Problem 9.29P

1.

To determine

The percentage of denominator level at which the plant was operating in 2014.

2.

To determine

How much fixed manufacturing overhead was included in 2013 and 2014 ending inventory under absorption costing.

3.

To determine

To reconcile: The difference in 2014 operating incomes under variable and absorption costing.

4.

To determine

To explain: How despite an increase in sales over 2013, 2014 operating income has declined under absorption costing.

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Recently, Abercrombie & Fitch has been implementing a turnaround strategy since its sales had been falling for the past few years (11% decrease in 2014, 8% in 2015, and just 3% in 2016.) One part of Abercrombie's new strategy has been to abandon its logo-adorned merchandise, replacing it with a subtler look. Abercrombie wrote down $20.6 million of inventory, including logo-adorned merchandise, during the year ending January 30, 2016. Some of this inventory dated back to late 2013. The write-down was net of the amount it would be able to recover selling the inventory at a discount. The write-down is significant; Abercrombie's reported net income after this write-down was $35.6 million. Interestingly, Abercrombie excluded the inventory write-down from its non-GAAP income measures presented to investors; GAAP earnings were also included in the same report. Question: What impact would the write-down of inventory have had on Abercrombie's expenses, Gross margin, and Net income?

Recently, Abercrombie & Fitch has been implementing a turnaround strategy since its sales had been falling for the past few years (11% decrease in 2014, 8% in 2015, and just 3% in 2016.) One part of Abercrombie's new strategy has been to abandon its logo-adorned merchandise, replacing it with a subtler look. Abercrombie wrote down $20.6 million of inventory, including logo-adorned merchandise, during the year ending January 30, 2016. Some of this inventory dated back to late 2013. The write-down was net of the amount it would be able to recover selling the inventory at a discount. The write-down is significant; Abercrombie's reported net income after this write-down was $35.6 million. Interestingly, Abercrombie excluded the inventory write-down from its non-GAAP income measures presented to investors; GAAP earnings were also included in the same report. Question: What impact would the write-down of inventory have had on Abercrombie's assets, Liabilities, and Equity?

Answer 2

Question

Chapter 9, Problem 9.29P

1.

To determine

The percentage of denominator level at which the plant was operating in 2014.

2.

To determine

How much fixed manufacturing overhead was included in 2013 and 2014 ending inventory under absorption costing.

3.

To determine

To reconcile: The difference in 2014 operating incomes under variable and absorption costing.

4.

To determine

To explain: How despite an increase in sales over 2013, 2014 operating income has declined under absorption costing.

Expert Solution & Answer

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Answer 3

Question

Chapter 9, Problem 9.29P

1.

To determine

The percentage of denominator level at which the plant was operating in 2014.

2.

To determine

How much fixed manufacturing overhead was included in 2013 and 2014 ending inventory under absorption costing.

3.

To determine

To reconcile: The difference in 2014 operating incomes under variable and absorption costing.

4.

To determine

To explain: How despite an increase in sales over 2013, 2014 operating income has declined under absorption costing.

Expert Solution & Answer

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Check out a sample textbook solution

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Answer 4

Question

Chapter 9, Problem 9.29P

1.

To determine

The percentage of denominator level at which the plant was operating in 2014.

2.

To determine

How much fixed manufacturing overhead was included in 2013 and 2014 ending inventory under absorption costing.

3.

To determine

To reconcile: The difference in 2014 operating incomes under variable and absorption costing.

4.

To determine

To explain: How despite an increase in sales over 2013, 2014 operating income has declined under absorption costing.

Expert Solution & Answer

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Answer 5

Chapter 9, Problem 9.29P

1.

To determine

The percentage of denominator level at which the plant was operating in 2014.

2.

To determine

How much fixed manufacturing overhead was included in 2013 and 2014 ending inventory under absorption costing.

3.

To determine

To reconcile: The difference in 2014 operating incomes under variable and absorption costing.

4.

To determine

To explain: How despite an increase in sales over 2013, 2014 operating income has declined under absorption costing.

Answer 6

Chapter 9, Problem 9.29P

1.

To determine

The percentage of denominator level at which the plant was operating in 2014.

Answer 7

Chapter 9, Problem 9.29P

1.

To determine

The percentage of denominator level at which the plant was operating in 2014.

Answer 8

2.

To determine

How much fixed manufacturing overhead was included in 2013 and 2014 ending inventory under absorption costing.

Answer 9

2.

To determine

How much fixed manufacturing overhead was included in 2013 and 2014 ending inventory under absorption costing.

Answer 10

3.

To determine

To reconcile: The difference in 2014 operating incomes under variable and absorption costing.

Answer 11

3.

To determine

To reconcile: The difference in 2014 operating incomes under variable and absorption costing.

Answer 12

4.

To determine

To explain: How despite an increase in sales over 2013, 2014 operating income has declined under absorption costing.

Answer 13

4.

To determine

To explain: How despite an increase in sales over 2013, 2014 operating income has declined under absorption costing.

Answer 14

Expert Solution & Answer

Answer 15

Expert Solution & Answer

Answer 16

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Answer 17

Ch. 9 - Differences in operating income between variable...Ch. 9 - Why is the term direct costing a misnomer?Ch. 9 - Do companies in either the service sector or the...Ch. 9 - Explain the main conceptual issue under variable...Ch. 9 - Companies that make no variable-cost/fixed-cost...Ch. 9 - The main trouble with variable costing is that it...Ch. 9 - Give an example of how, under absorption costing,...Ch. 9 - What are the factors that affect the breakeven...Ch. 9 - Critics of absorption costing have increasingly...Ch. 9 - What are two ways of reducing the negative aspects...

The percentage of denominator level at which the plant was operating in 2014.

The percentage of denominator level at which the plant was operating in 2014.

How much fixed manufacturing overhead was included in 2013 and 2014 ending inventory under absorption costing.

To reconcile: The difference in 2014 operating incomes under variable and absorption costing.

To explain: How despite an increase in sales over 2013, 2014 operating income has declined under absorption costing.

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Chapter 9 Solutions