1: Steven started ZZ Tire Company 10 years ago. The company started as an instal

Question

1:
Steven started ZZ Tire Company 10 years ago. The company started as an installer and seller of tires. The company has now expanded to the point where they now manufacture tires in China to supply the retail stores. They have retail sales of over $10 Million a year. Right now, the only accounting that takes place is regular bookkeeping for tax purposes. The company performs no managerial accounting.

Write out a couple of paragraphs where you tell Steven why he should implement managerial accounting, and explain to him what managerial accounting is. Go through basic points explaining why it is important to implement managerial accounting.

2:

ZZ Tire Company opened a new location last year. Use the following information to figure out contribution margin and operating income for last year:

Tires sold: 15,000

Retail Price per tire: $75 per tire

Cost per tire: $18 per tire

Installation expense per tire (payroll): $9 per tire

Utilities: $2,000 per month

Rent: $3,500 per month

Clerks and phone receptionist: $2,500 per month

Explanation / Answer

1. Managerial accounting today is considered to be a mandatoty because in this competitive industry of business, it is difficult to sustain and do good without the help oif managerial accounting. Managerial accounting helps an organization in identifying all types of infprmation related to the business in a given period of time which are considered and used by the manager so that the process of business is improved. The objective and goals of the organizations are defined and this accounting has a direct impact on them and the information that we used help the organization in achieving the goal.

I will suggest Steven to implemen and use managerial accounting because it will help the organization in having a competitive advantage over its competitors which is very much important in business today in order to stand out from the crowd.

2. Total Selling price = 15,000*75 = $1125000

Total Cost Price = 15000*18 = 270000

Installation = 15000*9 = 135000

Utilities = 2000*12 = 24000

Rent = 3500*12 = 42000

Clerks and phone receptionist = 2500*12 = 30000

Income = 1125000 - (270000+135000+24000+42000+30000)

= 624000

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