We will follow one company for the next four SLPs to analyze several managerial accounting concepts. Managerial accounting relies on internal detailed data, something that is not publicly available. However, it is amazing how much information a 10-K filed with the SEC contains. We can use this information with some assumptions to better understand concepts, analyze, and budget.
We will look at Netflix this session. The U.S. is not all about manufacturing, so it is beneficial to look at a variety of businesses. Download the company's 10-K for the past three years from its website (http://ir.netflix.com/) or the SEC database (http://www.sec.gov/edgar.shtml). It is a good idea to print and save this document since you will use if for several SLPs.
Let's review some information and learn about the company and how we can use the information contained in the 10-K. Don't worry, we will crunch some numbers for the company in future modules.
Review the background material and do research as needed.
Would you classify Netflix as a service company, a merchandiser, or a manufacturer? Does Netflix have any inventory? Which expenses would you classify as variable and which ones would you consider fixed based on traditional definitions? Identify the segments.
Use the Description of Business and Management Discussion and Analysis in the 10-K to identify costs Netflix incurs in each element of the value chain. Identify some of the company's other cost objects, if any. Why is this information relevant?
This solution provides a Netflix profile including costs and cost objects
Cost Drivers at Netflix, Inc
Netflix Inc., Form 10-K, YE 12/31/2006
Retrieved from http://www.secinfo.com/d14D5a.u19Me.htm
This website provides Netflix's annual report for 2006. Specifically, focus on the section entitled, â??Managementâ??s Discussion and Analysis of Financial Condition and Results of Operations.â? Use the information in this report to answer the following questions:
1. What drives price and output volume for Netflix?
2. What factors drive cost, unit cost, and demand for inputs to Netflix's service outputs?
3. Construct (linear) models of relationships between cost drivers and costs. Under what conditions are such models inappropriate?
4. In general, who in an organization is responsible for different components of a cost variance?View Full Posting Details