Acc 205 - week 3 - Case 2 - 15763

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  • Posted on: Wed 20 Mar, 2013
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Request Description

 

Identify several strategies for doubling net income. (Challenge)

 

Solution Description

 

Identify several strategies for doubling net income. (Challenge)

 

The costing method that has been adopted can be changed such as to reduce the Figure of Cost of goods sold and hence increase the Profit.

 

From the figures, it can be seen that Closing Inventory (Balance Sheet) is only $75. Therefore, with a change in Costing method, the Purchases and Opening Inventory for year 2008 shall decrease with a corresponding increase in Closing Inventory. This increase is not enough to offset the overall decrease in Cost of goods sold due to change in costing method and hence cost of Purchases. Now, because the cost of goods sold have decreased, the Gross Profit and hence Net Income will Increase.