Module 3 - SLP



Module 3 - SLP Cost Behavior

Introduction

The focus of this paper would be on analyzing Cost Behavior of company. Cost Behavior refers to how cost has been changing over a period and how this increasing trend can be controlled for better outcome. For this, companies that chosen in Module 2 i.e. Wal-Mart and Target Corp, Analysis of financial statements for two years will be conducted focusing on Revenues; Cost of goods sold, Accounts receivable, Accounts payable and Inventory trend.

Discussion

With the help of external information, Cost Behavior Analysis of Wal-Mart will be conducted in comparison with it competitor to see whether Wal-Mart has been incurring higher cost and vice versa.

Revenues

Revenues refer to total sales made by company during a year (Mowen, Hansen, Heitger, 2012). Following is the two year trend for Wal-Mart and Target.

 

Total revenues

 

2013

2012

Wal-Mart Stores

469,162

446,950

Target Corp

73,301

69,865

Source: mergentonline

Revenues of Wal-Mart has been increasing from last year i.e. in 2012 it was 446, 9520 while it increase to 469,162 i.e. 4.97% from last year due to increase in product sale and company face a partial decrease in Membership & other income. This should be noted that revenues growth of Wal-Mart has been reduced in last fiver year.

Source: Bloomberg

Above chart it is clear that sales and margin trend of Wal-Mart has been increasing from 2012.

Comparing this with target Corp, total revenues has been improving in 2013 i.e. it was 69,865 and it improved to 73,301 which makes 4.92% rise from last year. This increase show that company has been suing their selling strategy effectively since percentage increase is same in fact higher than percentage increase in sales of Wal-Mart. This is clear from the following trend that company has been managing their sales growth effectively.



Source: Bloomberg

Above chart state that sales of Target was much higher while net income has been much lower showing that company has higher expenses.

Cost of Goods Sold

Cost of Goods sold refers to cost that has been incurred in manufacturing a product (Mowen, Hansen, Heitger, 2012). Following are the cost of goods sold for Wal-Mart and Target Corp.

 

Cost of Goods Sold

 

2013

2012

Wal-Mart Stores

352,488

335,127

Target Corp

50,568

47,860

Source: mergentonline

Cost of Goods Sold of Wal-Mart has increased from last year i.e. 335,127 in 2012 to 352,488 in 2013 which makes 5.18% from last year. Comparing this trend with competitor Target Corp, trend increased from 47,860 to 50,568 in 2012 and 2013 respectively. Since sales is increasing, but this should ...