Companies all over the globe will experience some sales and profit decrease. Home Depot in the growing housing industry benefited greatly from the houses being built. The accounting concept portrayed in this situation for home depot is called operating leverage. Operation leverage is when managers view a small change in revenue and magnify it to dramatic changes in revenue (Edmonds, Tsay, & Olds, 2011). With a decrease in the market for construction materials, Home Depot is experiencing a 3% decrease revenue and a 21% decrease in profitability. This drastic change occurred because of variable and fixed costs. Due to these costs, sales decline in small percentages which affect a more significant decline in profit. Furthermore, incurred cost within Home Depot is broken down into two different types. These two different types are variable costs and fixed costs. To understand expenses, a manager has to understand the difference between these two costs (Willson, 2014). Fixed costs are constant, which means that no matter how much Home Depot is producing. Fixed costs include rent or utilities. Variable costs are costs that change depending on the amount of output. As total expenses increase for Home Depot, their fixed costs remain the same, which in return will decline profitability. In conclusion, the margin of safety is the buffer between projected sales and the break-even …show more content…
P., Tsay, B., & Olds, P. R. (2011). Fundamental managerial accounting concepts (6th ed.). New York, NY: McGraw-Hill Irwin. WILLSON, T. (2014). Finding Budget Flexibility - or Not: The Impact of Fixed and Variable Cost. Armed Forces Comptroller, 59(2), 31-34. Ciftci, M., Mashruwala, R., & Weiss, D. (2016). Implications of Cost Behavior for Analysts ' Earnings Forecasts. Journal Of Management Accounting Research, 28(1), 57-80. doi:10.2308/jmar-51073. Edmonds, T. P., Tsay, B., & Olds, P. R. (2011). Fundamental managerial accounting concepts (6th ed.). New York, NY: McGraw-Hill
Matthew Yarian ACCT 515 Unit 3 9/17/2016 Chapter 4 4-15) Since many of the indirect cost occurred during a year are not known until the end of the year or accounting period companies use predetermined cost driver rates. In establishing predetermined cost driver rates one must choose a cost driver such as labor and/or machine hours for example. Using a predetermined cost driver gives a company a tool to help keep expenses in proportion with sales and production volumes which allows them to make important decisions about products. 4-18)
Lowe’s Board of Directors consist of 12 members. 11 of them are independent. The CEO, Robert A. Niblock, is the chairman of the Board of Directors. Their major role is to use business judgment to act in what they believe to be the best interests of Lowe 's and its shareholders. Directors must reveal to each other any potential conflicts of interest they might have with respect to any matter under discussion and, if appropriate, refrain from voting on a matter in which they might have a conflict.
Holli, I agree with your assessment of Lowe’s, but in their stores I do find some attributes of a customer based marketing approach. For example, all of the plumbing supplies are located together in one section of the store, whereas wood and nails for carpenters are located in another. While both may be purchased by a “handyman”, professionals usually are more specific in their needs and the tools that they need to accomplish their tasks. Lowes is also well known for their wider aisles, brighter lighting and better organization with more products within easy reach, leading to the consensus that women prefer shopping at Lowes over Home Depot (Briles, 2012). Afraid I cannot comment much on Nordstorm since I have never had the experience
Lowes and Home Depot have been in competition with each other since the beginning of their existence. They are similar in many ways and different in many others. When looking at the functional strategies employed by each of the industry giants it is easy to see where they differ and where the similarities exist. Both of the companies operate with a corporate strategy of growth to meet the full market potential and captivate as much of the market as they can. Parnell (2014), reports that competitive strategy and marketing functional strategy go hand in hand.
69. Step fixed costs Costs which are fixed within certain levels of activity, then exceeds the level and becomes fixed again. 70. Semi-variable costs Costs which are fixed irrespective of the levels of activity, it becomes variable only when there is output. 71.
CONSOLIDATED STATEMENT OF EARNINGS (INCOME STATEMENT) The Home Depot, Inc. Income Statement can be found on the SEC 10-K Annual Report on page 33, where it reflects the financial results of how the company operating activity faired in the 52-53 week / fiscal period ending January 29,2017, for 2016, in generating revenue. Per The Home Depot Subsidiaries Consolidated Statement of Earnings (Income Statement) of 2016 fiscal year, the net sales of $94,595 (amount in USD millions).
An Auditor’s report is a report that used to examine the financial statements of a company. Its purpose is to examine the condition of the company and to assist with predicting the future of the company. The textbook uses Bed Bath & Beyond 's Auditor’s report as an example. Within this report, there is an example of an unqualified opinion. It states “the consolidated financial statements…present fairly, in all material respects, the financial position of Bed Bath & Beyond Inc….and the results of their operations and their cash flow…”(Godwin, N. and Alderman, W., 2013, p.41).
Introduction to Home Depot Home Depot stands out as the market leader in the home improvement industry. With the concept envisioned by two coworkers, Bernie Marcus and Arthur Blank, involving creating a chain of home-improvement warehouses selling a variety of products with a customer-oriented expert staff under one roof, Home Depot opened its first stores in 1978 in Atlanta. It concentrated heavily on offering a huge selection of home improvement merchandise at the lowest price, with customer service associates dedicated to providing expert guidance to consumers (primarily home owners and contractors). The stores were an instant success following which Marcus and Blank initiated an aggressive well-planned expansion program. (Bailey, 2014)
The last product that this company produces are the flow controllers. Flow controllers are products that are very customizable but are not as competitive on the market demanding higher prices. The planned gross margin for the flow controllers was 35% with an actual margin of 41.%. There was a significant increase without the loss of any business. The Wilkerson company have a quality leadership team; however, there are some things that needs to be changed for the company to succeed and prepare for potential price
22nd November, 2015 Laura Schim van der Loeff Academic and Study Skills Pros and cons of “cash-flow accounting” and those of “accrual accounting” Yuting Cui 10888217 In an entity, financial accounting, or bookkeeping is the tool used to keep track on financial activities. Users, for example: managers, stockholders, etc. use the result of financial statements to justify behaviors of the entity and make efficient decisions accounting to the data provided. With different basis, companies have various methods to do bookkeeping. Two methods mentioned in this paper are cash-flow basis and accrual basis accounting.
Analysis • This section is regarded as the most critical step in writing an effective accounting memo by bringing together the required facts of the research, any supporting authoritative literature, and an accountants overall evaluation before forming a conclusion. • Analysis includes information from relevant guidance, along with an accountant’s own words about how the guidance is applicable. • The memo should contain enough authoritative guidance that the user will not need to perform additional research in the Codification. • Make sure to utilize the concept known as the “guidance sandwich.”
They are called fixed costs since they are fixed regardless of the quantity of manufacture. The costs of facility payment are cover under the fixed cost. Every month is the same regardless of how many cars General Motors produced during that period of time. Elements that can influence variable cost are; supply and demand, task difficulty, location and effectiveness.
Also, various methods of controlling costs such as standard costing system and flexible budgets have close relation with the variable costing system, in turn making it easy to use those methods. 3. Companies using variable costing system are able to prepare income statement in contribution margin format that provides necessary information for cost volume profit (CVP) analysis. On the flip side, this data cannot be directly obtained from a traditional income statement prepared under absorption costing
Introduction: Here in this assignment a management accounting report needs to be prepared for analyzing how management accounting can be useful in providing the managerial information for the purpose of decision making. The organization selected to make this analysis is Southwest Airline. It is a management accounting report in which starting from the background of the company, the management accounting system of the company has been analyzed and how its’ providing the information for the purpose of management decisions being evaluated. Background of the company: Southwest Airlines was shaped in 1978 with reason to serve voyaging service via air course. What's more, after consolidation southwest aircrafts persistently succeed regarding productivity, great worker and union connection and consumer loyalty.
The reports of management accounting are only used internally; they do not have to observe by generally accepted accounting principle. Therefore, managers can prefer what parts of the company require additional analysis and which parts can be scanned later. During the phase of controlling, managers can check quantitative and qualitative feedback. Charles H. (1978) presents two points of advantages of management