2. Assume that Tipton’s wallpaper inventory at the time of the closure decision amounted to $23,700. How would you have treated this additional information in making the decision?3. What advantages might Internet- and magazine-based firms have over Tipton that would allow these organizations to offer deeply discounted prices—prices far below what Tipton can offer? Tipton One-Stop Decorating sells paint and paint supplies, carpet, and wallpaper at a single store location in suburbanDes Moines. Although the company has been very profitable over the years, management has seen a significant decline inwallpaper sales and earnings. Much of this decline is attributable to the Internet and to companies that advertise deeplydiscounted prices in magazines and offer customers free shipping and toll-free telephone numbers. Recent figures follow.●SalesVariable costsFixed costsTotal costsOperating income (loss)●Paint andSupplies$ 380,000$ 228,00056,000$ 284,000$ 96,000Carpeting$ 460,000$ 322,00075,000$ 397,000$ 63,000Tipton is studying whether to drop wallpaper because of the changing market and accompanying loss. If the line isdropped, the following changes are expected to occur:Wallpaper$ 140,000$ 112,00045,000$ 157,000$ (17,000)The vacated space will be remodeled at a cost of $12,400 and will be devoted to an expanded line of high-end carpet.Sales of carpet are expected to increase by $120,000, and the line's overall contribution margin ratio will rise by fivepercentage points.Tipton can cut wallpaper's fixed costs by 40 percent. Remaining fixed costs will continue to be incurred.Customers who purchased wallpaper often bought paint and paint supplies. Sales of paint and paint supplies areexpected to fall by 20 percent.The firm will increase advertising expenditures by $25,000 to promote the expanded carpet line. These companies probably carry little or no inventory. When a customer places an order, the firm simply calls its supplierand acquires the goods. The result may be lower expenditures for storage and warehousing.These firms do not need retail space for walk-in customers.Internet - and magazine-based firms can conduct business globally. Tipton, on the other hand, is confined to a single storein Des Moines.Internet- and magazine-based firms have the advantage of point-of-purchase displays and personalized selling.

Relevant cost in management accounting the term relevant cost really matters. The relevant cost is…

Tipton One-Stop Decorating sells paint and paint supplies, carpet, and wallpaper at a single store location in suburban Des Moines. Although the company has been very profitable over the years, management has seen a significant decline in wallpaper sales and earnings. Much of this decline is attributable to the Internet and to companies that advertise deeply discounted prices in magazines and offer customers free shipping and toll-free telephone numbers. Recent figures follow. ● ● ● Sales Variable costs Fixed costs Total costs Operating income (loss) Tipton is studying whether to drop wallpaper because of the changing market and accompanying loss. If the line is dropped, the following changes are expected to occur: ● Paint and Supplies $ 380,000 $ 228,000 56,000 $ 284,000 $ 96,000 Carpeting $ 460,000 $ 322,000 75,000 $397,000 $ 63,000 Wallpaper $ 140,000 $ 112,000 45,000 $ 157,000 $ (17,000) The vacated space will be remodeled at a cost of $12,400 and will be devoted to an expanded line of high-end carpet. Sales of carpet are expected to increase by $120,000, and the line's overall contribution margin ratio will rise by five percentage points. Tipton can cut wallpaper's fixed costs by 40 percent. Remaining fixed costs will continue to be incurred. Customers who purchased wallpaper often bought paint and paint supplies. Sales of paint and paint supplies are expected to fall by 20 percent. The firm will increase advertising expenditures by $25,000 to promote the expanded carpet line.

4th Edition

ISBN:9781337690881

Author:Jay Rich, Jeff Jones

Publisher:Jay Rich, Jeff Jones

Chapter5: Sales And Receivables

Section: Chapter Questions

Problem 89.1C: Ethics and Revenue Recognition Alan Spalding is CEO of a large appliance wholesaler. Alan is under...