Eight years ago Sue and Jim Williams established the Surf Clothing Company, whic

Question

Eight years ago Sue and Jim Williams established the Surf Clothing Company, which produces clothing and then sells the clothing through their retail stores. Sue and Jim use an accounting system to keep track of revenue and expenses. First, the revenue and expenses are summed across all stores to provide an overall report. Second, revenue and expenses are reported per retail store so that an individual store's performance can be monitored. Third, revenue and expenses are reported per category of clothing (categorized by age group and gender) so that the performance of each clothing category can be monitored. This helps Sue and Jim to identify the underlying reasons for the overall performance of the business. 1. Use of Accounting to Assess Consumer Demand. How can the accounting system be used to compare consumer demand across the stores? 2. How Financial Reporting Can Help Assess Managers. How can the accounting system be used to determine which stores deserve extra funding to support expansion? 3. How Financial Reporting Can Help Plan for Expansion. Sue and Jim Williams are planning to establish new clothing stores. First, they want to assess the performance of two stores that they opened earlier this year to detect any deficiencies in those stores that could be avoided in the new stores. How can accounting information be used to detect such deficiencies? 4. How Ratio Analysis Can Guide Production Decisions. Explain how ratio analysis may affect the decision regarding the amount of clothing to order for the stores each month.

Explanation / Answer

Accounting system for revene and expneses has been prepared for category of clothing, storewise and finally consolidated for overall. It is continuing for eight years and gives the movement of each element.

1. Management through the available yearwise Revenue (i.e.sales) could identify the category of clothing which has occupies major value on revenue and its movement year on year to determine the consumer demand, thereby it could help them to increase the market share in those products.

2. Financial reporting storewise could help the mangement to understand the market for stores, based on the performance achieved in several stores in continous financial years is consistent and does not find any improvement or reduction, Mangement could invest in new stores in that areas to improve the martket share that may be exclusively for category of clothing/ whole lot based on past sales

3. As in this case management opened two show room last year and the financial information relates to those two stores have the stock recieved, sales, closing stock, expenses and category of products sold,

Break up of purchases, sale and closing stock category wise, based on which management could know the moving and non moving stock, accordingly concentrate to increase the moving one and shift the non moving to those stores where it has existing demand. Expenese in those stores like admin, personal expenses compared with other stores which has similar kind of set up and to avoid unncessay expenses or otherwise create the benchmark and fix some portion of the salaries as incentive based on the turnover.

4. Ratios like Inventory turnover, stock holding period categorywise and storewise, gross profit ratio could help the management to reduce the inventory holding cost and increase the turnover

Related Questions

Navigate

• Browse (All)
• Browse E
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.