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For full-credit, you must write a 400–600 word essay in which you explain the...

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sweet107 | Student, College Freshman | Honors

Posted May 7, 2010 at 10:36 PM via web

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For full-credit, you must write a 400–600 word essay in which you explain the following questions to your client:

 

  • What are the advantages and disadvantages of selling a how-to book on repairs?
  • What do you think about this idea?
  • How would you change the accounting system for the business?
  • What additional accounts would be needed?
  • How would the financial statements change?
  • Develop a list of advantages and disadvantages for providing both services and merchandise to customers.

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marbar57 | Elementary School Teacher | (Level 3) Associate Educator

Posted May 12, 2010 at 1:47 AM (Answer #1)

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A How-to Book can be a useful tool to assist the average person with common repairs, but they must not be used in lieu of adequate training if required.  And, they are not a sure fix for all types of problems.  A person must be extremely careful to guard against serious or fatal injuries, especially when dealing with electrical systems or moving mechanical parts.  I believe all authors do mention explicitly in their books about such hazards, as well they should.  If a person feels confident enough to attempt a repair or routine maintenance on an item, then by all means go ahead!  But, if he or she has any doubts whatsoever about their ability to repair an item, they should consult a professional!

I've often found it a source of great amusement to see all the fix-it and repair manuals that get printed and distributed, especially the ones for Dummies.  I've no doubt some of them are well-written, and if someone has a general idea about the workings of an item can be put to good use.  But I think they assume too much and place too much freedom in the hands of novices that all too often results in danger or injury to us not-so-bright consumers!  We need to be careful and not overly confident in our mechanical abilities.  In other words, proceed with caution.

If a company issues a repair manual with their product, I feel they mean for the manual to fall into the more capable hands of at least an intermediate repairman who has some experience with the product.  I know that the expert in anything was once a beginner, but beginners need to try their hand on non-lethal objects first before they tackle the big ones!

As far as accounting practices go, repair manuals are revenue to the company and should be listed as such, whether they are included with a new product or sold as a separate one.  Additional accounts could be Periodicals Revenue or Repair Manuals Revenue.  I believe they would factor into a company's Cost of Good Sold as the company would keep an inventory of them stocked on the shelf. 

These revenue accounts would be listed in the ledgers under Revenues and Expenses, and as such would affect many accounts simultaneously, both asset, liability, and capital.  They would increase the worth of the company if the sales generated from them met or exceeded the cost to produce them. 

The company's financial statements would show the additional revenue accounts in their overall Income statement and as either an increase or decrease of net worth or income (or both).

Many companies do benefit from providing both sales and service to their customers, but sometimes providing service is not profitable in the long run.  A company would be wise to study and do their research into the expected profitability of such a venture before actually implementing it.  Perhaps a pilot study should be enacted first before committing their resources.

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