Question

This week in class we are discussing Decision Making and Merchandising Operations. We are reading Chapter 4 Financial Accounty: Merchandising and Multiple-Step Income Statement. Below are the objectives/compentencies.  

Can I get help with the below? Thank you in advance

3.1 Identify differences in merchandise and service operations.

3.2 Summarize the operating cycle and flow of cost.

3.3 Understand parts of a multiple-step income statement.

3.4 Interpret financial statement ratios.

3.5 Evaluate company profitability.

Answer 1

Ans 3.1 differences in a merchandise and service operations

Merchandise operations rely on sale of tangible goods to make money

Service operations measures results and time spent on a project on the basis of revenue

Merchandise operations have to consider transportation costs while service operations have no such Transportation costs but have distribution costs

Ans 3.2

The flow of costs is the path taken by costs as they move through a business. The concept is most applicable to a manufacturing firm, where costs are first incurred when raw materials are purchased. The flow of costs then moves to work-in-process inventory, where labor, machining, and overhead costs are added to the cost of the raw materials. Once the production process is complete, the costs move to the finished goods inventory classification, where the goods are stored prior to sale. When the goods are eventually sold, the costs move to the cost of goods sold.

The operating cycle is also known as the cash conversion cycle. In the context of a manufacturer the operating cycle has been described as the amount of time that it takes for a manufacturer's cash to be converted into products plus the time it takes for those products to be sold and turned back into cash

Ans 3.3

Multi-step income statement is divided into two main sections: the operating section and the non-operating sections.

The operating section contains information about revenues and expenses of the principle business activities. The gross profit and the operating profit figures are calculated in the operating section of a multi-step income statement. All operating revenues are grouped at the top of the income statement.

The non-operating section of a multi-step income statement, usually labeled as 'other incomes and expenses' contains those revenues and expenses which are not earned directly through principle business activities but are incidental to them