In considering how to allocate its scarce resources among its various members, a household considers. All of the above are correct. Fundamentally, economics deals with. Which of the following is correct? Economists study the management of scarce resources. Because economists believe that people pursue their best interests, they are not interested in how people interact. The overriding reason why households and societies face many decisions is that.
A society allocates its scarce resources to various uses. These scarce resources include. The phenomenon of scarcity stems from the fact that. Approximately what percentage of the world's economies experience scarcity? When a society cannot produce all the goods and services people wish to have, the economy is experiencing.
Which of the following products would be considered scarce? By using our site, you agree to our collection of information through the use of cookies. To learn more, view our Privacy Policy.
To browse Academia. Log in with Facebook Log in with Google. Remember me on this computer. Enter the email address you signed up with and we'll email you a reset link. Need an account? Click here to sign up. Download Free DOC. Download Free PDF. Ej2efj Itwatp. A short summary of this paper. Download Download PDF. Translate PDF. Identify the forms of business organization and the uses of accounting information. Explain the three principal types of business activity.
Describe the four financial statements, and how they are prepared. Simple 15—20 2A Identify users and uses of financial statements. Simple 15—20 3A Prepare an income statement, retained earnings Moderate 40—50 statement, and balance sheet; discuss results. The three basic forms of business organizations are 1 sole proprietorship, 2 partnership, and 3 corporation.
Advantages of a corporation are limited liability stockholders not being personally liable for cor- porate debts , easy transferability of ownership, and ease of raising funds. Disadvantages of a corporation are increased taxation and government regulations. Proprietorships and partnerships receive favorable tax treatment compared to corporations and are easier to form than corporations. They are also owner controlled. A person cannot earn a living, spend money, buy on credit, make an investment, or pay taxes without receiving, using, or dispensing financial information.
Accounting provides financial information to interested users through the preparation and distribution of financial statements. Internal users are managers who plan, organize, and run a business. To assist management, accounting provides timely internal reports. Examples include financial comparisons of operating alternatives, projections of income from new sales campaigns, forecasts of cash needs for the next year, and financial statements.
External users are those outside the business who have either a present or potential direct financial interest investors and creditors or an indirect financial interest taxing authorities, regu- latory agencies, labor unions, customers, and economic planners. The three types of business activities are financing activities, investing activities, and operating activities.
Financing activities include borrowing money and selling shares of stock. Investing activities include the purchase and sale of property, plant, and equipment. Operating activities include selling goods, performing services, and purchasing inventory. When a company pays dividends, it reduces the amount of assets available to pay creditors.
Net income does appear on the income statement—it is the result of subtracting expenses from revenues. In addition, net income appears in the retained earnings statement—it is shown as an addition to the beginning-of-period retained earnings. Indirectly, the net income of a company is also included in the balance sheet. The primary purpose of the statement of cash flows is to provide financial information about the cash receipts and cash payments of a business for a specific period of time.
The three categories of the statement of cash flows are operating activities, investing activities, and financing activities. The categories were chosen because they represent the three principal types of business activities. Retained earnings is the net income retained in a corporation. Retained earnings is increased by net income and is decreased by dividends and a net loss.
Liabilities are amounts owed to creditors. Put more simply, liabilities are existing debts and obligations. The liabilities are b Accounts payable and g Salaries and wages payable. An unqualified opinion shows that, in the opinion of an independent auditor, the financial state- ments have been presented fairly, in conformity with generally accepted accounting principles. This gives investors more confidence that they can rely on the figures reported in the financial statements.
Such a reclassification would be a violation of the principle of consistency in financial reporting and is a clear attempt to mislead readers of the financial reports. Hopefully, the auditors would discover any such attempt to manipulate annual earnings and would refuse to issue an unqualified opinion due to the lack of consistency.
However, recent accounting scandals may lead to some skepticism about how forceful auditors have been in enforcing tight accounting standards. To compute the number of units in the finished goods inventory at the end of the year, we must first compute the number of units sold during the year. Visic Corporation Income Statement Sales Conversion cost Then fill in the missing amounts by analysis of the available data. A Raw materials used in production see above B Cost of goods manufactured see above C , Gross margin The procedure outlined above is just one way in which the solution to the case can be approached.
Some may wish to start at the bottom of the income statement with gross margin and work upwards from that point. Also, the solution can be obtained by use of T-accounts.
Product costs e. Because there were ending inventories, some of the product costs should appear on the balance sheet as assets rather than on the income statement as expenses. Solar Technology, Inc. Before an income statement can be prepared, the cost of the 8, batteries in the ending finished goods inventory must be determined.
It is most likely that the insurance contract limits reimbursement for losses to those costs that would normally be considered product costs —in other words, direct materials, direct labor, and manufacturing overhead. Dell succeeds because of its operational excellence customer value proposition. The first three tenets focus on operational excellence. Dell faces numerous business risks as described in pages of the K. Students may mention other risks beyond those specifically mentioned in the K.
Control activities: Maintain a budgeting program that forecasts sales by product line, customer segment, and geographic region. While the budget is not going to be perfectly accurate, a reasonably accurate forecast would help Dell manage investor expectations. This is of particular concern for Dell because its lean production practices result in minimal inventory levels and because Dell relies on several single- sourced suppliers.
Control activities: Install controls such as physical security, data storage backup sites, firewalls and passwords that protect technology assets. Control activities: Develop a formal review process, supervised by legal counsel, to ensure that Dell complies with governmental regulations. The audit report also contains two opinions dealing with internal control. These two opinions were required by SOX at the time of this K filing. This report includes a reference to SOX.
SOX requires the CEO and CFO to certify that the K and its accompanying financial statements do not contain any untrue statements and are fairly stated in all material respects. Based solely on the inventories number on the balance sheet, students cannot determine the answer to this question. Nonetheless, students should be able to readily ascertain that Dell is a manufacturer.
Examples of indirect inventoriable costs include the costs to sustain the manufacturing plants that cannot be conveniently traced to specific products.
The utility bills, insurance premiums, plant management salaries, and equipment-related costs, etc. The gross margin in dollars has steadily increased and the gross margin as a percent of sales has remained fairly steady for two reasons.
First, the cost of goods sold consists largely of variable costs e. As sales grow, these variable costs increase in total, but as a percentage of sales, they remain fairly stable over time.
Some students may ask about the fixed overhead costs that are incurred to run the plants. Spreading fixed overhead costs over a higher volume of sales would increase the gross margin percentage. Second, pages mention that Dell plans to reduce product costs in four areas: manufacturing costs, warranty costs, design costs, and overhead costs. Using terminology that will be defined in Chapter 12, Dell grows profits by increasing turnover while holding margin reasonably constant.
It also reduces raw materials inventory because suppliers provide just-in-time delivery of the quantities needed to satisfy customer orders. Product costs include those costs involved with making or acquiring the product.
Period costs include all costs that are not product costs. The expenses mentioned in the paragraph above are not involved with making the product so they are expensed as incurred. When the focus changes from external reporting to internal decision making, the need to comply with GAAP disappears. Here are four examples of cost objects for Dell including one direct and one indirect cost for each cost object. A direct cost would be the cost of raw material component parts and an indirect cost would be factory utility costs.
A direct cost would be the component parts used to make these products and an indirect cost would be factory insurance costs that are assigned to these products. Garvin, Senior Vice President, Worldwide Procurement and Global Customer Experience see page 11 , given that he oversees worldwide procurement operations.
A direct cost would be a sales representative who is dedicated to serving the government segment and an indirect cost would be research and development costs that are expended on products purchased by more than one customer segment. It appears that the overtime spent completing the job was simply a matter of how the job happened to be scheduled. A company could treat the cost of fringe benefits relating to direct labor workers as part of manufacturing overhead. This approach spreads the cost of such fringe benefits uniformly over all units of output.
Alternatively, the company could treat the cost of fringe benefits relating to direct labor workers as additional direct labor cost. This latter approach charges the costs of fringe benefits to specific jobs rather than to all units of output. Quality of conformance 2. Quality costs 3. Quality circles 4. Prevention costs, appraisal costs 5. Internal failure costs, external failure costs 6. External failure costs 7. Appraisal costs 8. Prevention costs 9. Internal failure costs External failure costs Prevention costs, appraisal costs Product testing Product recalls Rework labor and overhead.
Quality circles Downtime caused by defects Cost of field servicing Inspection of goods Quality engineering Warranty repairs Statistical process control Net cost of scrap Depreciation of test equipment Returns and allowances arising from poor quality Disposal of defective products Technical support to suppliers Systems development Warranty replacements Field testing at customer site Product design Prevention costs and appraisal costs are incurred in an effort to keep poor quality of conformance from occurring.
Internal and external failure costs are incurred because poor quality of conformance has occurred. Despite this improvement, the company still has a poor distribution of quality costs.
The bulk of the quality costs in both years is traceable to internal and external failure, rather than to prevention and appraisal. Although the distribution of these costs is poor, the trend this year is toward more prevention and appraisal as the company has given more emphasis on quality. The reason internal failure costs have gone up is that, through increased appraisal activity, defects are being caught and corrected before products are shipped to customers. Thus, the company is incurring more cost for scrap, rework, and so forth, but it is saving huge amounts in field servicing, warranty repairs, and product recalls.
If the company continues its emphasis on prevention and appraisal—and particularly on prevention—its total quality costs should continue to decrease in future years. Although internal failure costs are increasing for the moment, these costs should decrease in time as better quality is designed into products. Appraisal costs should also decrease as the need for inspection, testing, and so forth decreases as a result of better engineering and tighter process control.
These declines in warranty repairs and customer returns should result in increased sales in the future. This increase has probably resulted from the increase in appraisal activities.
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