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Emma Nguyen, is the Controller for Jaxon Unlimited Inc, a manufacturer of golf equipment. The standard golf equipment has a sales price of $ 9
Emma Nguyen, is the Controller for Jaxon Unlimited Inc, a manufacturer of golf equipment. The standard golf equipment has a sales price of $ with variable costs of $ The Company projects that fixed costs will be approximately $M for the year. At the beginning of the year, Nguyen budgeted that the companys net earnings would grow by approximately during the current fiscal year. Unfortunately, now in preparation for an upcoming annual shareholder meeting, Nguyen is projecting that due to the continue delays in the supply chain and impacts of inflation, sales will be significantly less than expected for the year and that the company will not meet its earnings projections. Therefore, Nguyen has requested that James Jordan, the production manager, should rollback inventory levels and implement spending freezes for the remainder of the year. In addition, Nguyen has asked you, her accounting manager, to carefully scrutinize any costs that are currently classified as period costs to reclassify as much as possible to product costs. Lastly, Nguyen is investigating whether to close at least one of its current retail locations.
As the accounting manager, prepare a twopage report double spaced to the CFO, responding to the following questions be creative:
Why are budgets referred to as living, breathing documents? Why would it be necessary and beneficial to update the budget based on the changes in the actual activities described above?
Explain the difference in the accounting treatment and flow of costs for product costs and period costs?
Do you believe Nguyens actions would be ethical to shift period costs to product costs? What would you do if Nguyen does not agree with your assessment?
Name three specific ways that the company can alter its cost structure in order to lower its breakeven point in order to increase the companys likelihood to make a profit during the upcoming year. Fully explain the choices and how they would specifically change the breakeven point.
What specific financial information would be useful in determining which retail location is suitable to be closed, including the analysis of fixed costs related to the company and the location? Are there any qualitative factors that would impact this decision about whether to close the location?
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