a-An identification of the accounting concept involved. Several different accounting concepts resulted in the 3% reduction of earnings felt by Home Depot in 2007 and 21% lower than 2006. Home Depot has high fixed costs in running its retail operation. A large number of Home Depot stores exist to meet the needs of consumers wanting the convenient purchase of often large items. The inventory that sits at each store and distribution center is a very high fixed costs that incur (Edmonds & Tsay & Olds). However, this diverse and high inventory level is needed for Home Depot to compete. One of the important notes from the economic crises that took place is high operation leverage was a detriment to Home Depot. The fixed cost in the Home Depot case was high and as sales slipped this caused a dramatic change in the organization's overall profitability and earnings. …show more content…
(2011). Fundamental Managerial Accounting Concepts (6th ed.). New York, NY: McGraw-Hill/Irwin. b-A discussion of how various major types of costs incurred by Home Depot were likely affected? Various major types of costs that affected Home Depot in 2007 are fixed cost and variable cost. An example of variable cost within the Home Depot stores are hours paid to employees (Edmonds & Tsay & Olds). Employee costs is a high variable and fixed cost with Home Depot. In 2009, Home Depot announced the reduction of 7,000 jobs 2% of its workforce and also closing of 34 Expo Stores (Kavilanz, 2009). The Expo store closings by Home Depot are a way of reducing fixed and variable cost hurdles that Home Depot consistently faces. References: Edmonds, T., Tsay, B., & Olds, P. (2011). Fundamental Managerial Accounting Concepts (6th ed.). New York, NY: McGraw-Hill/Irwin. Kavilanz, P. (2009, January 26). Home Depot cutting 7,000 jobs. Retrieved August 9,
Hilton, R.W. and Platt, D.E. (2017). Managerial Accounting: Creating Value in a Dynamic Business Environment (11th ed.). New York, NY: McGraw-Hill Education. ISBN 9781259569562
The Home Depot is the fastest growing retailer in U.S. History and currently has more than 2,200 convenient locations throughout the United States (including the territories of Puerto Rico and the Virgin Islands), Canada, China and Mexico. Stores average 105,000 square feet with approximately 23,000 additional square feet of outside garden area (The Home Depot, 2012). The retail inventory consists of up to 40,000 different kinds of building materials, home improvement supplies, appliances and lawn and garden products for all of your project needs. Selections may vary from store to store because
Rich, J., Jones, J., Heitger, D., Mowen, M., & Hansen, H. (2012). Cornerstones of Financial & Managerial Accounting. Mason, OH: South-Western/Cengage
The Home Depot is the leader in the industry, but the market share is almost negligible (0.9%). However, it obtained 62% growth in 1985 which is far above the average in the industry. Judging from Porter’s five forces, the Home Depot is facing challenges brought by the existing firms. No much challenges raise from the new entrants. But the threats from the suppliers and the
Edmonds, T., Tsay, B., & Olds, P. (2011). Fundamental Managerial Accounting Concepts (6th ed.). New York, NY: McGraw-Hill/Irwin.
22. Variable costs ________. A. are fixed per unit and vary in total B. are fixed in
The last several decades have been a turbulent period for management accounting in the United States. Many U.S. businesses failed in the international market, and the management accounting profession recognized that some of the blame rests upon shortcomings in the information provided to managers. A continuous flow of articles dating back to the mid-1980's such as Kaplan (1986) or Chalos and Bader (1986) has criticized contemporary management accounting systems. On the other hand, Reider and Saunders (1988) offered a defense of contemporary management accounting methods asserting that the methods are adequate but have not been used appropriately.
Source: Workbook to accompany Accounting an Introduction, 3rd edition, Jenner & Silvester, Pearson Prentice Hall 2006
Collier, P.M. & Kizan, S.M. (2013). Accounting for Managers. Mississauga, ON: John Wiley & Sons Canada, Ltd.
In the summary we will summarise briefly all the questions and the corresponding answers. For the first three questions and the question about the two store chains, we would like to refer to the corresponding chapters (External Analysis of Home Depot, Internal analysis of Home Depot, Strategic factors and Large box (endless selection) versus smaller stores
Management accounting change and the continuously changing roles of management accountants have dominated accounting literature for the past few decades and the theme of management accounting change procedures has been a topical issue of many studies such as Baines and Langfield-Smith, 2003; Kapla, 1985 and Granlund and Lukka, 1998, just to name a few.
Managerial accounting is a set of methods used by managers to help them make effective and efficient decisions about financial resources. These methods were primarily designed to educate the decision makers within an organization. Managerial accounting primary focus is the whole company as well as segments within the organization, which are of major importance. Managerial accounting can be used strategically within a business to evaluate performance, pricing decisions, investments, and determining long range planning and policy development. Managerial accountants try to determine important factors to consider when trying to
Accounting is the collection and aggregation of information for decision makers including managers, investors, regulators, lenders, and the public. Accounting systems affect behavior and management and have affects across departments, organizations, and even countries. This paper will give the reader an understanding about cost accounting. This paper will discuss: Why is cost accounting so important to the success of the firm; what are the various methods of cost accounting and how are they used; how does an operating budget work to discipline a firm’s management; what are the elements of a budget; how are budgets constructed; what is variance analysis and how it is used.
Chapter 01 The Changing Role of Managerial Accounting in a Dynamic Business Environment Answer Key
In the following essay I will be looking at the arguments put forward by Robert S. Kaplan and others on why management accounting techniques had lost their relevance to organisations by the 1980s. Since the 1980s new management accounting techniques have been developed, I will be looking at two recent developments in management accounting and assessing whether they have sufficiently addressed the concerns raised by Kaplan and if they have improved the usefulness of management accounting in organisations.