Cost Accounting Paper

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EntertainmentNow.com

Prepared for
Dr. Lucian Zelazny
Department of Accounting
McCoy College of Business
601 University Drive
San Marcos, Texas 78666

Prepared by
Veronica Piña
Rupinder Singh
Ashley Vollmer

April 23, 2013

EntertainmentNow.com Case Overview
EntertainmentNow.com is considered one of the world’s leading Internet retailers of entertainment products that sells an array of books, music, videos, and DVD’s, toys, and small electronics on the company’s International website. In the past, the company primarily marketed and sold to individual customers but recently has begun serving corporate and institutional customers as well. The company purchases products from its vendors, holds the products in inventory, and fulfills customer’s orders directly. EntertainmentNow.com’s operating results for the past years were extremely disappointing to management and to the company’s stockholders due to spending a significant amount of capital on the company’s technology and infrastructure. In result of the negative returns of the past year, the company needs to improve their operating performance. Even though the actual volume sales exceeded the expected volume sales, there was still an increase of net loss per item. The planned operating results showed a net loss of $1.94 while the actual results showed a loss of $2.10. Mark Dibbs, Vice president of Financial Analysis for EntertainmentNow.com is expected to explain what caused the company’s increased shortfall. Based on his analysis, he will explain this variance fully and make recommendations to senior management. Analysis of Loss

The rates and the number of units sold determine planned and actual result differences, representing the variance. Variances are used in performance evaluation to determine areas that are performing differently than expected. As noted in chapter seven, focusing on understanding what caused the variances allows managers to more completely handle what is happening...
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