A distinguishing feature of today’s digital technology is that it is characterized by zero (or near zero) marginal costs. Once the investment needed to create a digital good has been incurred, it costs next to nothing to roll out and distribute millions of copies. Software, e-books and music are largely available now as downloadable products. Each piece of software, book or music download has almost no marginal cost. Downloaded purchases are typically fully automated, so there are no labour costs. Also, as the software development, publishing or music production costs are all in the past (i.e. sunk costs), there are no additional material or component costs. There are, of course, fixed costs incurred on running servers and other components of the technology behind downloadable products. Compare this with the purchase of an item of clothing from a leading high street retail outlet such as Zara or H&M. The purchase in this case is processed by a member of staff at the store. Going back along the supply chain, there may be logistical or delivery costs and, of course, the labour and material cost of the item of clothing itself. Such retailers do offer online ordering, which saves some cost, but there are still marginal costs of delivery for example. Questions 1 Do you agree that the marginal cost of downloaded software or music is nil? 2 What marginal costs, if any, might be incurred by the provider of the servers where software/music is downloaded from?
> In 2007, crime-fighting targets set by the UK government were criticized by senior and on-the beat police officers as driving them to make ‘ludicrous’ decisions on the prosecution of crimes. For example, such crimes included a ‘man who was cautioned by
> It appears that most firms benefit from having a budget in place, to allow them to use their limited resources in the most optimal manner possible in pursuit of their strategic objectives. However, the merits associated with budgeting are debated. For ex
> Although the apex of ZBB’s popularity in the late 1970s is long past, there has been renewed interest in ZBB in today’s environment of fiscal constraint, says Shayne Kavanagh in an article published in Public Management. He cites a Government Finance O
> Big data is a term that describes the large volume of raw data, both structured and unstructured, that inundates a business on a daily basis. It includes information such as email messages, social media postings, phone calls, purchase transactions, w
> This is a question posed by the Becker’s Hospital Review website. According to an article on the website from October 2019, the budgeting processes in healthcare have lagged other sectors, especially in the use of ‘data-driven forecasting approaches’.
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> Writing in The Australian Financial Review Jack Mintz states that for investment decisions, taxes matter, and Australia’s company tax rate (30 per cent) is too high in comparison to other countries, particularly in the increasingly competitive global
> As our planet faces many threats from resource use and climate change, governments, firms and individuals are beginning to change their views and ways of work. One resource the human species needs to survive is water. Despite water being a natural re
> Increasingly, householders and small businesses are considering renewable power generation systems to decrease their energy costs. The two most popular approaches in Europe are wind and solar energy. While larger businesses typically appraise all inv
> In October 2019, Pure Gold Mining Inc. announced that its Madsen Mine project in Red Lake, Ontario, had identified a new expansive gold deposit. The deposits are in a previously unexplored area and the company reports the gold as being of high quality. P
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> Each individual’s attitude to risk lies somewhere on a continuum with risk-seeking at one extreme and risk-averse at the other extreme. The same logic generally applies to organizations or even for that matter, national governments or political instit
> Management accountants would typically perform a risk assessment as follows: identify the risks, assess their impact and probability, and develop appropriate risk responses. Although very practical, it is uncertain as to how specific management accoun
> The CGMA website offers management accountants a collection of tools and resources which are useful to identify, assess and respond to (or manage) various types of risk faced by an organization. For example, it identifies the following four categories
> As reflected in RWVs 11.3, costing healthcare is a challenge. While ABC may offer some benefits to healthcare costing, the adoption rates of ABC are not high, and its implementation is often complex. To make matters simpler, time-driven ABC (TDABC) may
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> Fast fashion refers to clothes that are designed and manufactured quickly and sold to consumers at extremely low prices. New garments arrive in stores weekly, or even more frequently, and cost so little that consumers can fill their wardrobes with new
> Raab, Shoemaker and Mayer (2007) developed a workable ABC model for a restaurant operation in the USA that enabled previously undistributed indirect operating expenses to be traced to individual menu items. Menu prices were previously determined on a
> Until recently, Xu Ji Electric Co Ltd was a typical state-owned Chinese enterprise manufacturing electrical products such as relays. From an accounting point of view, this implied a manual bookkeeping system which was primarily designed to meet external
> From the perspective of a firm selling goods or providing services, not all customers are profitable, as some will cost a lot more to serve than others. Therefore, to be commercially viable, a business must acquire and retain a sufficient number of cust
> Eskom is a South African electricity public utility. In recent years, it has been subjected to some media coverage as the country faces energy infrastructure issues and the company deals with high debt. Eskom has power plants which burn coal. It entered
> Apple Inc. is well known for developing innovative products like the iPhone, iPad and iPod. Such devices are manufactured with complex electronic components and incur substantial design and development costs. The actual cost to manufacture these product
> Cloud computing describes the delivery of information systems without the purchase of physical hardware or even software in some instances. What this means for an average business is that they can purchase processing capability, data storage or content d
> Lidl and Aldi, the German discount supermarkets, have both announced significant expansion plans for the UK. Aldi expects to have 1,000 UK stores by 2022, an increase of over 230 on their current 762 stores; Lidl, which currently has 710 shops in th
> Many firms outsource manufacturing and other activities, but at the same time are increasingly aware that outsourcing may be best suited to non-core activities. Take packaging for example. In the craft brewing sector, a bottling line is a large invest
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> Most developed economies have well-developed road and highway networks. From time to time new highways are built to relieve congested cities, but by and large most developed countries are not embarking on major road-building projects. Reducing government
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> A headline in The Guardian of 23 September 2019 asked, ‘Why did Thomas Cook collapse after 178 years in business?’ The Thomas Cook Group collapsed in 2019, having been a leading British tour operator and airline. As reported in The Guardian, the immediat
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> The break-even price of crude oil includes production costs, exploring or finding costs, oil well development costs, transportation costs, and selling and general administration expenses. A survey published in 2015 showed some interesting insights into t
> The Airbus A380 was the world’s first double decker aircraft. It can accommodate from 555 to 853 passengers depending on the class configuration. Long haul airlines such as Singapore Airlines were early adopters of the aircraft back in 2007. The 2018 lis
> According to a blog post by VWG Consulting, the key to successful and sustainable cost reduction in a manufacturing environment lies with variable costs. Indeed, in high-margin production firms such as Nike or Apple, as their variable costs may be a mult
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> Each year, the paper and pulp industry produce millions of tonnes of sludge in the production of paper. This sludge is typically disposed of in landfill sites or incinerated. Both disposal methods are costly and environmentally undesirable. However, some
> South Africa is one of the top gold producers in the world, holding about 6,000 metric tonnes of reserves in mines as of 2019. Most mining operations have waste and by-products, some of which are disposable, reusable or even saleable; others are not. A
> Real World View 5.2 gave some insights in the process of distilling whiskey. Irish and Scotch whiskey producers operate in similar environments and their processes are quite likely to yield the same process losses due to evaporation – which is referred t
> Bushmills Irish Whiskey, a world-renowned brand of Diageo plc, is distilled in County Antrim in Northern Ireland. The Old Bushmills distillery has been in operation since 1608 and currently markets five distinct whiskeys under the Bushmills brand. Whiske
> The Internet of Things (IoT) refers to physical objects which are connected to the internet. This includes household devices and many business and industrial applications. Together with 5G networking technologies, the IoT has given way to a vast array of
> Almost all beer contains four basic ingredients – a grain (typically barley), water, hops and yeast. While the process of brewing can be complex, with potentially some variation in the ingredients used, the basic process generally follows a standard appr
> SAP is one of the global leaders in the provision of enterprise resource planning (ERP) software. While ERP software is complex, it must still incorporate basic transaction capturing modules to allow a business to gather data for more detailed analysis.
> Capturing labour costs accurately includes capturing time worked on customer orders, jobs or projects. In some cases, this is a reasonably easy task, such as in a supervised factory setting. In some cases, capturing hours worked accurately can be more di
> It was decided in the first quarter of fiscal 2016 that Commercial Metals Company Ltd would change the accounting method it used to value its inventories. This change would be for its Americas Mills, Americas Recycling and Americas Fabrication segments.
> Although there has always been a strong demand for tea in Malaysia, very few cafés actually offered bubble tea on their menus. However, in recent times, bubble tea cafés have become increasingly popular across the country, with many new chains being esta
> There are many factors which can influence the costing system choice of a business. In manufacturing, one factor is the nature of the industry itself and one way to classify the type of manufacturing is as an a-type industry (‘a’ representing assembly) o
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> The near collapse of the Irish banking sector in 2008, due to insolvency, led the Irish Government at the time to provide a blanket guarantee to cover the liabilities of all the financial institutions involved. This decision was taken in an attempt to ma
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> Decker Company has five products in its inventory. Information about the December 31, 2021, inventory follows. The cost to sell for each product consists of a 15 percent sales commission. Required: 1. Determine the carrying value of inventory at December
> Taylor Corporation reports inventory and cost of goods sold based on calculations from a LIFO periodic inventory system. The company’s records under this system reveal the following inventory layers at the beginning of 2021 (listed in chronological order
> Caterpillar, Inc., is one of the world’s largest manufacturers of construction, mining, and forestry machinery. The following disclosure note is included in the company’s 2017 financial statements: D. Inventories ($ in millions) Inventories are stated at
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> Topanga Group began operations early in 2021. Inventory purchase information for the quarter ended March 31, 2021, for Topanga’s only product is provided below. The unit costs include the cost of freight. The company uses a periodic inv
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> Johnson Corporation began the year with inventory of 10,000 units of its only product. The units cost $8 each. The company uses a perpetual inventory system and the FIFO cost method. The following transactions occurred during the year: a. Purchased 50,00
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> On January 1, 2021, Avondale Lumber adopted the dollar-value LIFO inventory method. The inventory value for its one inventory pool on this date was $260,000. An internally generated cost index is used to convert ending inventory to base year. Year-end in
> Kingston Company uses the dollar-value LIFO method of computing inventory. An external price index is used to convert ending inventory to base year. The company began operations on January 1, 2021, with an inventory of $150,000. Year-end inventories at y
> Refer to the situation described in BE 11–14. Assume that 2019 depreciation was incorrectly recorded as $32,000. This error was discovered in 2021. (1) Record the journal entry needed in 2021 to correct the error. (2) What is depreciation on the building
> On January 1, 2021, the Taylor Company adopted the dollar-value LIFO method. The inventory value for its one inventory pool on this date was $400,000. Inventory data for 2021 through 2023 are as follows: Required: Calculate Taylor’s end
> Inverness Steel Corporation is a producer of flat-rolled carbon, stainless and electrical steels, and tubular products. The company’s income statement for the 2021 fiscal year reported the following information ($ in millions): Sales =
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> Avon Products, Inc., located in New York City, is one of the world’s largest producers of beauty and related products. The company’s consolidated balance sheets for the 2016 and 2015 fiscal years included the following
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> Refer to the situation described in BE 11–14. Assume that instead of changing the useful life and residual value, in 2021 the company switched to the double-declining-balance depreciation method. How should Robotics account for the change? What is deprec
> Nike, Inc., is a leading manufacturer of sports apparel, shoes, and equipment. The company’s 2017 financial statements contain the following information ($ in millions): A note disclosed that the allowance for uncollectible accounts had
> EMC Corporation manufactures large-scale, high-performance computer systems. In a recent annual report, the balance sheet included the following information ($ in millions): In addition, the income statement reported sales revenue of $24,704 ($ in millio
> Rothschild Chair Company, Inc., was indebted to First Lincoln Bank under a $20 million, 10% unsecured note. The note was signed January 1, 2011, and was due December 31, 2024. Annual interest was last paid on December 31, 2019. At January 1, 2021, Rothsc
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> Chamberlain Enterprises Inc. reported the following receivables in its December 31, 2021, year-end balance sheet: Current assets: Accounts receivable, net of $24,000 in allowance for uncollectible accounts = $218,000 Interest receivable = 6,800 Notes rec
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> At the beginning of 2019, Robotics Inc. acquired a manufacturing facility for $12 million. $9 million of the purchase price was allocated to the building. Depreciation for 2019 and 2020 was calculated using the straight-line method, a 25-year useful life
> Supply Club, Inc., sells a variety of paper products, office supplies, and other products used by businesses and individual consumers. During July 2021 it started a loyalty program through which qualifying customers can accumulate points and redeem those
> Assume the same facts as in P 6–2, except that customer must pay $75 to purchase the extended warranty if they don’t purchase it with the $50 coupon that was included in the Protab Package. Creative estimates that 40% of customers will use the $50 coupon
> Citation Builders, Inc., builds office buildings and single-family homes. The office buildings are constructed under contract with reputable buyers. The homes are constructed in developments ranging from 10–20 homes and are typically so
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> Complete the requirements of P 6–10 assuming that Westgate Construction’s contract with Santa Clara County does not qualify for revenue recognition over time. Data from P 6-10: In 2021, the Westgate Construction Compa
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> Fit & Slim (F&S) is a health club that offers members various gym services. Required: 1. Assume F&S offers a deal whereby enrolling in a new membership for $700 provides a year of unlimited access to facilities and also entitles the member to receive a v
> On January 1, 2021, The Barrett Company purchased merchandise from a supplier. Payment was a noninterest bearing note requiring five annual payments of $20,000 on each December 31 beginning on December 31, 2021, and a lump-sum payment of $100,000 on Dece
> On January 1, 2021, the Montgomery Company agreed to purchase a building by making six payments. The first three are to be $25,000 each, and will be paid on December 31, 2021, 2022, and 2023. The last three are to be $40,000 each and will be paid on Dece
> Johnstone Company is facing several decisions regarding investing and financing activities. Address each decision independently. 1. On June 30, 2021, the Johnstone Company purchased equipment from Genovese Corp. Johnstone agreed to pay Genovese $10,000 o
> On September 30, 2021, Athens Software began developing a software program to shield personal computers from malware and spyware. Technological feasibility was established on February 28, 2022, and the program was available for release on April 30, 2022.
> On the last day of its fiscal year ending December 31, 2021, the Sedgwick & Reams (S&R) Glass Company completed two financing arrangements. The funds provided by these initiatives will allow the company to expand its operations. 1. S&R issued 8% stated r
> Lowlife Company defaulted on a $250,000 loan that was due on December 31, 2021. The bank has agreed to allow Lowlife to repay the $250,000 by making a series of equal annual payments beginning on December 31, 2022. Required: Calculate the amount at which
> The Diversified Portfolio Corporation provides investment advice to customers. A condensed income statement for the year ended December 31, 2021, appears below: The following balance sheet information also is available: In addition, the following transac
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> The following income statement items appeared on the adjusted trial balance of Schembri Manufacturing Corporation for the year ended December 31, 2021 ($ in thousands): sales revenue, $15,300; cost of goods sold, $6,200; selling expenses, $1,300; general
