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Company: Nestl S.A. Data for the year ended December 31, 2023: Item Amount Revenue 100,000,000,000 Cost of Goods Sold 60,000,000,000 Operating Expenses 30,000,000,000 Income

Company: Nestlé S.A.
 Data for the year ended December 31, 2023:

Item

Amount

Revenue

€100,000,000,000

Cost of Goods Sold

€60,000,000,000

Operating Expenses

€30,000,000,000

Income Tax Expense

€8,000,000,000

Net Income

€12,000,000,000

Total Assets

€150,000,000,000

Total Liabilities

€80,000,000,000

Shareholders' Equity

€70,000,000,000

Managerial Accounting Process:

  1. Recording Costs:
    • Nestlé records its cost of goods sold (COGS) at €60 billion, representing costs associated with manufacturing food and beverage products.
    • Operating expenses, including marketing, distribution, and administrative costs, are recorded at €30 billion.
  1. Analyzing Costs:
    • Conduct brand-level profitability analysis to evaluate the financial performance of different product categories.
    • Perform cost variance analysis to identify opportunities for cost reduction and efficiency improvements in production and distribution.
  1. Reporting Costs:
    • Present COGS in the income statement to illustrate the direct costs associated with producing food and beverage items.
    • Detail operating expenses to provide transparency on costs incurred to support marketing campaigns, distribution networks, and corporate functions.
    • Provide cost allocation reports to show how costs are distributed across different brands, markets, and distribution channels.

Requirements:

  1. Calculate Nestlé's gross profit margin and discuss cost management strategies in the food and beverage industry.
  2. Determine Nestlé's operating profit margin and analyze the impact of cost controls on profitability and brand equity.
  3. Analyze the impact of income tax expense on Nestlé's net income and propose tax planning strategies to optimize tax liabilities.
  4. Evaluate how Nestlé recognizes revenue from food and beverage sales and its relationship with cost management practices.
  5. Explain the significance of the Income Measurement Objective in Nestlé's financial reporting and its alignment with cost allocation.

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