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    The income statement shows sales of $354,000 with building costs as the largest expense at 61% of costs. While profit is low at 2%, most profit comes from party sales. The document discusses allocating indirect costs like building costs and salaries to classes and parties. It notes the cost per class is much higher than per party due to building costs. It recommends increasing party sales and reducing costs to boost profits.

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    Tot'r us framework.xlsx

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    The income statement shows sales of $354,000 with building costs as the largest expense at 61% of costs. While profit is low at 2%, most profit comes from party sales. The document discusses allocating indirect costs like building costs and salaries to classes and parties. It notes the cost per class is much higher than per party due to building costs. It recommends increasing party sales and reducing costs to boost profits.

    Copyright:

    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd
    Flag for inappropriate content
    Download as xlsx, pdf, or txt
    6 views4 pages

    Tot'r Us Framework

    Uploaded by

    yimin liu
    The income statement shows sales of $354,000 with building costs as the largest expense at 61% of costs. While profit is low at 2%, most profit comes from party sales. The document discusses allocating indirect costs like building costs and salaries to classes and parties. It notes the cost per class is much higher than per party due to building costs. It recommends increasing party sales and reducing costs to boost profits.

    Copyright:

    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd
    Flag for inappropriate content
    Download as xlsx, pdf, or txt
    of 4

    Income statement in financial accounting

    Sales 354,000
    Building related costs 216,000 61%
    Salaries 100,000 28%
    Supplies and Food 21,000 6%
    Adv 10,000 3%
    Profit 7,000 2%

    Global analysis: Profit margin is very low. Building related costs are the highest proportion of costs.

    q1 How does TRU consider each line of costs?

    Building related costs

    Salaries, supplies and Food

    TRU considers thoses costs as indirect costs.


    Advertising

    TRU considers advertising as indirect costs but will not allocate any of those costs to classes nor parties

    Cost of 1 class and cost of 1 party according to the current cost system?
    Cost of 1 class: total value units unit value
    Building related cost #DIV/0!
    Salaries, supplies, food #DIV/0!
    Cost of 1 class #DIV/0!
    Selling price 270.0
    Profit of 1 class #DIV/0!

    Cost of 1 party:
    Salaries, supplies, food - - #DIV/0!
    Cost of 1 party #DIV/0!
    Selling price 200
    Profit of 1 party #DIV/0!

    Comments:
    The cost of 1 class is almost 3 times higher than the cost of 1 party, because of the building related costs.
    Most of the profit of the company comes from the parties
    Business decisions: increase the number of parties, reduce the costs, make more profit from classes, increa
    What if the company decided to drop the classes because the profit of 1 classe if close to 0?
    Be careful, calculate the unit contribution margin first, before deciding any drop

    Q2: The building related costs should be allocated to….


    The current cost system is not that good nor that accurate.
    Maybe there are mistakes of classification of the costs.
    The best cost system should reflect the real life, be close to what really happens

    Q3: compute the cost of ………. the 360 classes not held during summer
    Building related costs -
    Theoretical max activity
    uFC (based on adjusted activity) #DIV/0!

    Number of classes not held 360


    Cost of under utilization #DIV/0!
    Income statement in cost accounting according to TRU
    Classes Parties TOTAL

    Sales 324,000 30,000 354,000


    Building related costs -
    Salaries supplies and food 121,000
    Margin per activity 324,000 30,000 233,000
    Unit margin per activity 270.0 200.0
    Advertising 10,000
    Profit 223,000
    d costs are the highest proportion of costs.

    ne of costs?
    ocate any of those costs to classes nor parties

    nt cost system?

    of 1 party, because of the building related costs.

    ce the costs, make more profit from classes, increase the selling price of classes
    e the profit of 1 classe if close to 0?
    fore deciding any drop

    to what really happens

    uring summer

    This cost should appear on a separated line of the income statement in cost accounting.
    The action plan to solve that cost is to get 360 classes during the summer

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