Explain step-by-step how average-cost pricing would be used to set the exact price of a product. What is the primary risk associated with average-cost pricing?Step 1: Calculate the total costs expected to produce the product.Step 2: Forecast the number of units expected to be sold.Step 3: Divide the total cost by the number of units to determine the average cost per unit.Step 4: Add the desired profit margin to the average cost per unit to determine the average price per unit.
What will be an ideal response?
A risk in average-cost pricing involves the reliance on a forecast estimate. If sales fall short of forecast, it is likely that some coats may also reduce but total cost would not drop proportionately due to fixed costs. This risk supports the general wisdom regarding taking a holistic approach to setting price and not focusing solely on cost alone.
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At Forrest Industries, all sales are on account. Sienna Marcos is responsible for mailing invoices to customers, recording the amount billed, opening mail, recording the payment, and making deposits to the bank. Sienna is very devoted to the family
business and never takes off more than one or two days for a long weekend. The customers know Sienna and sometimes send personal notes with their payments. Another clerk handles all aspects of accounts payable. Sienna's brother, who is president of Forrest Industries, has hired an accountant to help with expansion. REQUIRED: 1 . List some problems with the current accounts receivable system. 2 . What suggestions would you make to improve internal control? 3 . How would you explain to Sienna that she personally is not the problem?
The costs incurred to manufacture a product can be classified into two primary elements of manufacturing cost: materials and factory overhead
Indicate whether the statement is true or false
Intraperiod tax allocation
a. involves the allocation of income taxes between current and future periods. b. associates tax effect with different items in the income statement. c. arises because certain revenues and expenses appear in the financial statements either before or after they are included in the income tax return. d. arises because different income statement items are taxed at different rates.
When a firm has securities outstanding that, if exchanged for shares of common stock, would decrease basic earnings per share by 30% or more, generally accepted accounting principles require a dual presentation: basic earnings per share and diluted earnings per share
Indicate whether the statement is true or false