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Started By
Message
re: Solve this problem: how much did the owner lose?
Posted on 8/20/18 at 9:06 am to slackster
Posted on 8/20/18 at 9:06 am to slackster
quote:
If someone stole your 2008 F250, would you say you lost what it's worth ($10,000) or what you paid for it ($50,000)?
You'd say you lost 50k but in reality you lost 10k because that is what they truck can bring in the market.
1
Posted on 8/20/18 at 9:07 am to terd ferguson
You lost 10 dollars on that widget.
You paid 5, and lost the opportunity for 5.
You’ll never get that back.
Your post proves the point. If ALL widgets sell for 10 and you lost 5 just to get one, you also lost the opportunity to make 5 more dollars on top of that.
You paid 5, and lost the opportunity for 5.
You’ll never get that back.
Your post proves the point. If ALL widgets sell for 10 and you lost 5 just to get one, you also lost the opportunity to make 5 more dollars on top of that.
Posted on 8/20/18 at 9:07 am to terd ferguson
quote:
Let's say I sell widgets. I pay $5 for a widget from my vendor and sell them for $10 to my customers. I have 10 on the shelf and somebody steals 1... I've got 9 left.
A customer wants 20 widgets. I have 9 and I order 11 more to fill the order.
I paid for 10 widgets on my shelf plus an additional 11 to fill the order.
21 widgets = $105
Somebody stole 1 = -$5
I sell 20 to my customer = $200
So instead of making $100 profit I only made $95 bc somebody stole a widget.
I didn't lose out on the potential profit for that widget that was stolen bc I easily replaced it and filled my order. I lost out on the $5 I paid for the widget originally.
This is the correct explanation
Posted on 8/20/18 at 9:07 am to Mingo Was His NameO
A repost going 4 pages, it must be Monday.
Posted on 8/20/18 at 9:08 am to LNCHBOX
quote:
You're still ignoring the lost profit on the stolen widget and having to buy an extra one to gain it back.
The only thing I lost was the $5 cost of the stolen widget. How did I lose out on profit if I was able to easily replace it and fulfill the order? I still made the profit from the replacement widget and if you look at my books I only lost my $5 cost.
Posted on 8/20/18 at 9:08 am to Mingo Was His NameO
quote:
This is the correct explanation
Except it isn't. I anxiously await your post saying "haha I made you mad by saying the wrong thing"
Posted on 8/20/18 at 9:09 am to theunknownknight
quote:
Your post proves the point. If ALL widgets sell for 10 and you lost 5 just to get one, you also lost the opportunity to make 5 more dollars on top of that.
I understand what you are saying but oppurtunity costs aren't tangible costs. You "lost" out on the opportunity to make money, you didn't actually lose any real money. Opportunity costs can't be measured tangibly on a balance sheet or P/L.
Posted on 8/20/18 at 9:09 am to terd ferguson
quote:
The only thing I lost was the $5 cost of the stolen widget.
Wrong.
quote:
How did I lose out on profit if I was able to easily replace it and fulfill the order?
Did you replace that item for free?
quote:
I still made the profit from the replacement widget and if you look at my books I only lost my $5 cost.
You didn't though. You had the opportunity to make profit on 21 widgets. Instead, you were only able to make profit on 20. If you want to overthink the problem to give an answer other than $100, you need to overthink it completely.
Posted on 8/20/18 at 9:10 am to LNCHBOX
quote:
Except it isn't. I anxiously await your post saying "haha I made you mad by saying the wrong thing"
Every accounting text book will tell you are wrong but I assume you know better than them anyway.
Posted on 8/20/18 at 9:11 am to theunknownknight
I originally said 130 because I don’t read very closely I am too impulsive and therefore thought about the total value.
But I go is 60 of just thinking about actual cash. But if it was that easy then it won’t be a pizzle so I have a feeling that’s not right
But I go is 60 of just thinking about actual cash. But if it was that easy then it won’t be a pizzle so I have a feeling that’s not right
This post was edited on 8/20/18 at 9:18 am
Posted on 8/20/18 at 9:11 am to Mingo Was His NameO
quote:
Every accounting text book will tell you are wrong but I assume you know better than them anyway.
Since a senior CPA and I discussed this very question last night at dinner, yea I'll say I'm confident in what I'm saying.
ETA: Outside of being given the actual costs, $100 is the answer to this question. As I said on my first post, anything other than $100 is overthinking it and there is no way to prove any of it.
This post was edited on 8/20/18 at 9:13 am
Posted on 8/20/18 at 9:12 am to LNCHBOX
quote:
You're still ignoring the lost profit on the stolen widget and having to buy an extra one to gain it back. I assume at this point you're just trolling.
Yeah, at a minimum, the stolen widget cost you $5, it will take $5 to replace it, and you'll only make $5 on that $10. Who is going to replace that $5 profit?
Posted on 8/20/18 at 9:13 am to Mingo Was His NameO
quote:
I understand what you are saying but oppurtunity costs aren't tangible costs.
Lost profit is a tangible cost, though.
$5 sunk costs + $5 lost profit = $10 lost
Posted on 8/20/18 at 9:14 am to slackster
quote:
Yeah, at a minimum, the stolen widget cost you $5, it will take $5 to replace it, and you'll only make $5 on that $10. Who is going to replace that $5 profit?
No one. That’s the point. The $5 in lost profit is gone forever.
Posted on 8/20/18 at 9:16 am to theunknownknight
quote:
If ALL widgets sell for 10 and you lost 5 just to get one, you also lost the opportunity to make 5 more dollars on top of that.
But I made back the opportunity by replacing the widget.
Lost $5, paid $5 to replace, sold for $10
If you do the math, I'll always have $5 less in profit to cover the stolen widget.
Buy 100 widgets, 1 stolen, buy replacement... 101 widgets ($505). Sell 100 widgets ($1000)... profit $495 instead of $500 (-$5)
Buy 400 widgets, 1 stolen, buy replacement... 401 widgets ($2005). Sell 400 widgets ($4000)... profit $1995 instead of $2000 (-$5)
Buy 23456 widgets, 1 stolen, buy replacement... 23457 widgets ($117285). Sell 12345 widgets ($123450)... profit $6165 instead of $6170 (-$5)
My cost is $5 for a widget and I always have to eat that $5... but only that $5
This post was edited on 8/20/18 at 9:18 am
Posted on 8/20/18 at 9:17 am to terd ferguson
quote:
But I made back the opportunity by replacing the widget.
But you had to pay extra to do that. You are either ignoring the original cost to buy widget or the cost of replacing the stolen widget.
Posted on 8/20/18 at 9:17 am to theunknownknight
quote:
Lost profit is a tangible cost, though.
$5 sunk costs + $5 lost profit = $10 lost
I understand that but it won't be tracked on the Financials. Think about the journal entries in this example. The loss is going to come by writing down inventory.
Posted on 8/20/18 at 9:18 am to LNCHBOX
Simply put - they are ignoring sunk costs
This post was edited on 8/20/18 at 9:19 am
Posted on 8/20/18 at 9:18 am to LNCHBOX
quote:
You are either ignoring the original cost to buy widget or the cost of replacing the stolen widget.
Correct
Posted on 8/20/18 at 9:18 am to LNCHBOX
quote:
But you had to pay extra to do that.
OK so I'm out $10... and now I forgot how we even got here.
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