Question: The following ratios are for four companies
The following ratios are for four companies in different industries. Some of these ratios have been discussed in the textbook and others have not, but their names explain how the ratio was computed. These data are for the companies’ 2018 fiscal years. The four sets of ratios, presented randomly, are as follows.
The four companies to which these ratios relate are:
- Anheuser-Busch InBev SA/NV is a company that produces beer and related products.
- Caterpillar, Inc. is a company that manufactures heavy construction equipment.
- Denny's Corp. operates approximately 1,709 restaurants as of December 26, 2018.
- Weight Watchers International, Inc. is a company that provides weight loss services and products. Its fiscal year-end was December 31, 2018, during which 84 percent of its revenues came from services and 16 percent from product sales.
Required
Determine which company should be matched with each set of ratios. Write a memorandum explaining the rationale for your decisions.
> What is the primary benefit associated with using a standard cost system?
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> What is a master budget?
> Ken Shilov, manager of the marketing department, tells you that “budgeting simply does not work.” He says that he made budgets for his employees and when he reprimanded them for failing to accomplish budget goals, he got unfounded excuses. Suggest how Mr
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> What is the advantage of using a perpetual budget instead of the traditional annual budget?
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> What are the three levels of planning? Explain each briefly.
> Why does preparing the master budget require a committee?
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> Describe the relationship between relevance and accuracy.
> Identify the four hierarchical levels used to classify costs. When can each of these levels of costs be avoided?
> Identify some of the constraints that limit a business’s ability to satisfy the demand for its products or services.
> Are variable costs always relevant? Explain.
> Why would a supervisor choose to continue using a more costly old machine instead of replacing it with a less costly new machine?
> The managers of Wilcox Inc. are suggesting that the company president eliminate one of the company’s segments that is operating at a loss. Why may this be a hasty decision?
> Identify some qualitative factors that should be considered in addition to quantitative costs in deciding whether to outsource.
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> What level(s) of costs is (are) relevant in special order decisions?
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> Identify two qualitative considerations that could be associated with special order decisions.
> Are all fixed costs unavoidable?
> Identify the primary qualities of revenues and costs that are relevant for decision making.
> To facilitate cost tracing, a company’s activities can be subdivided into four hierarchical categories. What are these four categories? Describe them and give at least two examples of each category.
> Tom Rehr made the following comment: “Facility-level costs should not be allocated to products because they are irrelevant for decision-making purposes.” Do you agree or disagree with this statement? Justify your response.
> Briefly describe the activity-based costing allocation process.
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> Why do activity-based cost drivers provide more accurate allocations of overhead in an automated manufacturing environment?
> What is the difference between volume-based cost drivers and activity-based cost drivers?
> Why are labor hours ineffective as a companywide allocation base in many industries today?
> What is the relationship between activity-based management and just-in-time inventory?
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> In a manufacturing environment, which costs are direct and which are indirect in product costing?
> How is an allocation rate determined? How is an allocation made?
> What are the important factors in determining the appropriate cost driver to use in allocating a cost?
> Give an example of why the statement “All direct costs are avoidable” is incorrect.
> Why are the terms direct cost and indirect cost independent of the terms fixed cost and variable cost? Give an example to illustrate.
> What is a direct cost? What criteria are used to determine whether a cost is a direct cost?
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> Why is cost accumulation imprecise?
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> Respond to the following statement: “The allocation base chosen is unimportant. What is important in product costing is that overhead costs be assigned to production in a specific period by an allocation process.”
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> Why are some manufacturing costs not directly traceable to products?
> What is a cost object? Identify four different cost objects in which an accountant would be interested.
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> What is the equation method for determining the break-even point? Explain how the results of this method differ from those of the contribution margin approach.
> What are three alternative approaches to determine the break-even point? What do the results of these approaches show?
> The following information relates to The Kroger Co., and Publix Super Markets Inc., for their 2019 and 2018 fiscal years. Table Summary: The Selected Financial Information with amounts in millions except per share amounts of The Kroger Company shows thre
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> If Company A has a projected margin of safety of 22 percent while Company B has a margin of safety of 52 percent, which company is at greater risk when actual sales are less than budgeted?
> In what three ways can the contribution margin be useful in cost-volume-profit analysis?
> How does a contribution margin income statement differ from the income statement used in financial reporting?
> What is the relationship between cost-volume-profit analysis and the relevant range?
> Setting the sales price is easy: Enter cost information and desired profit data into one of the cost-volume-profit formulas, and the appropriate sales price can be computed mathematically. Do you agree with this line of reasoning? Explain.
> How would the algebraic formula used to compute the break-even point under the equation method be changed to solve for a desired target profit?
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> Refer to the job cost sheet in Exhibit 12.3. Required Construct a spreadsheet that re-creates the job cost sheet in Exhibit 12.3. Use formulas wherever possible, such as in the total row. Data from Exhibit 12.3: Reality Bytes Job-order, process, and hyb
> What does the term break-even point mean? Name the two ways it can be measured.
> Are companies with predominately fixed cost structures likely to be more profitable?
> Explain the risk and rewards to a company that result from having fixed costs.
> Would a fixed or variable cost structure be more advantageous if volume is decreasing?
> If volume is increasing, would a company benefit more from a pure variable or a pure fixed cost structure? Which cost structure would be advantageous if volume is decreasing?
> Explain the limitations of using operating leverage to predict profitability.
> How is operating leverage calculated?
