Business Applications Case Financial versus managerial accounting
An article in the April 12, 2004, edition of BusinessWeek, The Costco Way—Higher Wages Mean Higher Profits,” compared Costco Wholesale Corporation data with Wal Mart’s Sam’s Club data. The tables below present some of the data used to support the article’s claim.
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How Costco Spends More on Employees |
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Costco |
Sam’s Club |
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Average hourly wage rate |
$15.97 |
$11.53 |
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Employees covered by a health care plan |
82% |
47% |
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Average annual health care costs per employee |
$5,735 |
$3,500 |
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Employees covered by a retirement plan |
91% |
64% |
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Average annual retirement costs per employee |
$1,330 |
$747 |
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Benefits to Costco from Spending More on Employees |
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Costco |
Sam’s Club |
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Annual employee turnover |
6% |
21% |
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Labor and overhead cost as a percent of sales |
9.8% |
17% |
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Annual sales per square foot |
$795 |
$516 |
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Annual profit per employee |
$13,647 |
$11,039 |
Required
a. Is the information in the tables above best described as primarily financial accounting data or managerial accounting data in nature? Explain.
b. Provide additional examples of managerial and financial accounting information that could apply to Costco.
c. Explain why a manager of an individual Costco store needs different kinds of information than someone who is considering lending the company money or investing in its common stock.