Case 6-3 Morgan Manufacturing Essay

Case 6-3

Question you:

Westwood's Major Margin Percentage is computed as (sales less cost of goods sold) as a percentage of net sales income. For Westwood it's determined as follows depending on the financial statements (all in countless dollars):

2010 Gross Margin: (2000-1100) sama dengan 900

2010 Product sales Revenue = 2000

2010 Gross Perimeter Percentage = 45%

2009 Gross Perimeter: (1500 – 800) = 700

2009 Sales Earnings = 1500

2009 Major Margin Percentage = 46. 7%

Westwood's Pre-Tax Go back on Revenue is determined as:

2010 Pre-tax income = 300

2010 Revenue = 2k

2010 Pre-tax return on sales sama dengan 15%

2009 Pre-tax income = two hundred fifity

2009 Revenue = 1500

2009 Pre-tax return on sales = 16. 67%

Westwood's Pre-tax return about assets is calculated since:

2010 Pre-tax income sama dengan 300

2010 Assets sama dengan 2240

2010 Pre-tax return on property = 13. 39%

2009 Pre-tax cash flow = 250

2009 Resources = 1875

2009 Pre-tax return upon assets sama dengan 13. 33%


YearGross Margin %Pre-tax ROSPre-tax ROA

201045%15%13. 39%

200946. 7%16. 67%13. 33%

Question two:

The balance sheet accounts that are affected contain inventory, which often affects total assets. Retained earnings can be ultimately influenced because of the diverse way of accounting for earnings.


•Total Assets

•Retained Earnings

The ratios and measurements afflicted include:

•Cost of Goods Marketed

•Gross Perimeter

•Gross Margin percentage of Sales

•Income Before Income taxes

•Income Tax Expense

•Pre-tax return on sales, and pre-tax come back on property

Using LIFO vs . FIFO affects the cabability to directly assess results as a result of impact on major margin and profit. Presuming merchandise costs are growing over time, accounting under LIFO will understate the net cash flow (profit) to get the current period by determining the earnings to the greatest cost merchandise.

Supposing two companies had similar merchandise costs and earnings for the period, the use of different inventory priced at methods complicates...


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