Author Question: Write a short note on the importance of establishing the order of witnesses. What will be an ... (Read 81 times)

penguins · **on:** Jul 6, 2018

Write a short note on the importance of establishing the order of witnesses.

What will be an ideal response?

Question 2

CVP analysis, international cost structure differences.

Plush Decor, Inc., is considering three possible countries for the sole manufacturing site of its newest area rug: Italy, Spain, and Singapore. All area rugs are to be sold to retail outlets in the United States for 200 per unit. These retail outlets add their own markup when selling to final customers. Fixed costs and variable cost per unit (area rug) differ in the three countries.

Country Sales Price to Retail Outlets Annual Fixed Costs Variable Manufacturing Cost per
Area Rug Variable Marketing & Distribution Cost per Area Rug
Italy 200.00 6,386,000 70.00 27.00
Spain 200.00 5,043,000 61.00 16.00
Singapore 200.00 12,240,00 84.00 14.00

Required:
1. Compute the breakeven point for Plush Decor, Inc., in each country in (a) units sold and (b) revenues.
2. If Plush Decor, Inc., plans to produce and sell 80,000 rugs in 2014, what is the budgeted operating income for each of the three manufacturing locations? Comment on the results.

carlsona147 · **Reply #1 on:** Jul 6, 2018

Answer to Question 1

The investigative process generally proceeds from the general to the specific. When multiple individuals are identified as potential sources of information, a similar approach should be used to establish the order in which they are interviewed. The interview order should track the proximity of the individual to the subject of interest, beginning with peripheral players, then moving to the insiders.
For example, in the context of a criminal investigation, the order of witnesses often proceeds as follows:
Neutral third-parties - Those having some knowledge but no involvement.
Corroborative witnesses - Those not directly involved but able to corroborate specific facts related to the offense.
Suspected co-conspirators in the alleged offense-Beginning with least culpable and proceeding to most culpable.
Target - The suspect.
Scheduling witness interviews in the order of probable culpability allows the forensic accountant to gather as much information as possible before the target is interviewed. In many cases-especially criminal cases-there is only one opportunity to interview key witnesses. Thus, maximum preparation is essential.

Answer to Question 2

Variable Variable
Sales Price Annual Manufacturing Marketing and Contribution Operating Income
to Retail Fixed Cost per Distribution Cost Margin Breakeven Breakeven for Budgeted Sales
Country Outlets Costs Rug per Rug Per Rug Units Revenues of 80,000 Rugs
(1) (2) (3) (4) (5) = (1) (3)
(4) (6) = (2) (5)
(6) (1)
(7) = 80,000 (5)(2)

Italy 200.00 6,386,000 70.00 27.00 103.00 62,000 12,400,000 1,854,000
Spain 200.00 5,043,000 61.00 16.00 123.00 41,000 8,200,000 4,797,000
Singapore 200.00 12,240,000 84.00 14.00 102.00 120,000 24,000,000 (4,080,000)

Spain has the lowest breakeven point because it has both the lowest fixed costs (5,043,000) and the lowest variable cost per unit (77.00). Hence, for a given selling price, Spain will always have a higher operating income (or a lower operating loss) than Italy or Singapore.

The Singapore breakeven point is 120,000 units. Hence, with sales of only 80,000 units, it has an operating loss of 4,080,000.