a) In what case do redundant write-offs of general production costs take place? b) What is...

a) In what case do redundant write-offs of general production costs take place?

b) What is the best basis for evaluating the results of a company’s business activities?

c) What kinds of flexible budgets are used when analyzing budget fulfillment

Solutions

Expert Solution

a) Redundant write offs of general production costs takes place in following cases:-

It helps with tax savings options for asset owners. Actions like write-off reduce tax liability by creating expenses that are non-cash in nature which ultimately results in lower reported income.
It supports the objectives of a write-off accounting accuracy.

b) The best basis of evaluating the results of a company's business activities is Numerical and Financial Factors.

In addition to numerical factors such as profit margin, other indicators allows to evaluate company's performance on purely financial terms. Liquidity and solvency ratios evaluate the company's performance with regard to ensuring that it can continue its operations. Liquidity is the ratio of current assets minus current liabilities divided by total assets and measures how quickly a company can raise cash.

Solvency is the ratio of net profit plus depreciation divided by total liabilities and measures company's ability to continue to service its debt. One can compare these ratios to those of other companies to evaluate performance.

c) Flexible budgets are one way companies deal with different levels of activity. A flexible budget provides budgeted data for different levels of activity.The kinds of flexible budgets used when analyzing budget fulfillment are :-

1. Sales

2. Cost of goods sold

3. Selling expenses

4. General & administrative expenses

5. Income taxes

6.Net Income

ekkarill92 answered 2 hours ago

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