Discussion Post I
1) Why should each department participate in preparing its own budget? How much control do you think each department should have? Does your answer differ for when considering a service firm versus a manufacturing firm?
2) Explain the difference between variable costing and absorption costing income statements. Provide income statements in both variable costing and absorption costing formats for an initial period and its successive period in a case where all manufactured products within the two periods are sold by the end of the second period, but the number of units sold in the first period is less than the number of units manufactured in this period. What is the interesting observation in comparing the two types of income statements? Explain your example in detail and provide in-text citations.
3) Jamie is considering leaving her current job, which pays $75,000 per year, to start a new company that develops applications for smartphones. Based on market research, she can sell about 50,000 units during the first year at a price of $4 per unit. With annual overhead costs and operating expenses amounting to $145,000. Jamie expects a profit margin of 20 percent. This margin is 5 percent larger than that of her largest competitor, Apps, Inc.
A. If Jamie decides to embark on her new venture, what will her accounting costs be during the first year of operation?
a. Her company's implicit costs?
b. Her company's opportunity costs?
B. Suppose that Jamie's estimated selling price is lower than originally projected during the first year. How much revenue would she need in order to earn:
o Positive accounting profits?
o Positive economic profits.
The response must include a reference list. Using one-inch margins, double-space, Times New Roman 12 pnt font and APA style of writing and citations.