Budget Outlook Report
Mario McBride
Managerial Accounting
Instructor: Brian Shaw
September 22, 2014
Mr. Wayne and Mr. Chester held a conference meeting to discuss the findings in the cash budget has given the both of them feeling uneasy on specific details of the cash report budget. Mr. Wayne believes that the gross margin perhaps may shrink to 27.5 percent due to higher purchase price and concerned with the impact that this may have on borrowings. This a logical concern as gross margin shrinks amid higher purchasing prices/cost. As stated in Stewart (1987) pricing is a crucial but often misunderstood aspect of retailing. Questions about pricing include the between margin and markup, the effect of lowering prices, how to price item, and how to create a positive price image. It is good to remember that pricing creates the gross margin. “A closer look at the difference between margin and markup must endure here. First, a margin is the ration of gross profit to selling price” (Stewart, 1987, para 4). Next, the markup is the ration of gross profit to cost. The markup will not give an exact amount of gross earnings. It strongly recommended reviewing the competition, as this would find any limitations of cost structure. Mr. Chester thinks that “stock outs” occur too frequently and wants to understand the impact of increasing inventory levels of 30 and 40 percent of next quarter’s sales on their full investment. High inventory levels negatively affect cash flow as well as warehousing. Demand planning ensures available inventory as sales grow. Critical to meet customers’ need and expectations, Mr. Chester’s concern is well intended here. The ability to project such demands for products to meet and to ensure the availability as sales grow vital in keeping up with customers' needs. Nordmeyer, also suggest that a risk exist in term of cash flow, sales prices and warehousing capacity in the event that manufacturing capacity is
Managerial Accounting
Instructor: Brian Shaw
September 22, 2014
Mr. Wayne and Mr. Chester held a conference meeting to discuss the findings in the cash budget has given the both of them feeling uneasy on specific details of the cash report budget. Mr. Wayne believes that the gross margin perhaps may shrink to 27.5 percent due to higher purchase price and concerned with the impact that this may have on borrowings. This a logical concern as gross margin shrinks amid higher purchasing prices/cost. As stated in Stewart (1987) pricing is a crucial but often misunderstood aspect of retailing. Questions about pricing include the between margin and markup, the effect of lowering prices, how to price item, and how to create a positive price image. It is good to remember that pricing creates the gross margin. “A closer look at the difference between margin and markup must endure here. First, a margin is the ration of gross profit to selling price” (Stewart, 1987, para 4). Next, the markup is the ration of gross profit to cost. The markup will not give an exact amount of gross earnings. It strongly recommended reviewing the competition, as this would find any limitations of cost structure. Mr. Chester thinks that “stock outs” occur too frequently and wants to understand the impact of increasing inventory levels of 30 and 40 percent of next quarter’s sales on their full investment. High inventory levels negatively affect cash flow as well as warehousing. Demand planning ensures available inventory as sales grow. Critical to meet customers’ need and expectations, Mr. Chester’s concern is well intended here. The ability to project such demands for products to meet and to ensure the availability as sales grow vital in keeping up with customers' needs. Nordmeyer, also suggest that a risk exist in term of cash flow, sales prices and warehousing capacity in the event that manufacturing capacity is