Contemporary Interiors (CI) manufactureshigh-quality furniture in factories in North Carolina for sale to top American retailers. In 1995, CIpurchased a lumber operation in Indonesia, and shifted from using American hardwoods to Indonesian raminin its products. The ramin proved to be a cheaper alternative, and it was widely accepted by Americanconsumers. CI management credits the early adoption of Indonesian wood for its ability to keep its NorthCarolina factories open when so many competitors closed their doors. Recently, however, consumers havebecome increasingly concerned about the sustainability of tropical woods, including ramin. CI has seensales begin to fall, and the company was even singled out by an environmental group for boycott. It appearsthat a shift to more sustainable woods before year-end will be necessary, and more costly.In response to the looming increase in material costs, CEO Geoff Armstrong calls a meeting of upper management.The group generates the following ideas to address customer concerns and/or salvage companyprofits for the current year:a. Pay local officials in Indonesia to “certify” the ramin used by CI as sustainable. It is not certain whetherthe ramin would be sustainable or not. Put highly visible tags on each piece of furniture to inform consumersof the change.b. Make deep cuts in pricing through the end of the year to generate additional revenue.c. Record executive year-end bonus compensation accrued for the current year when it is paid in thenext year after the December fiscal year-end.d. Reject the change in materials. Counter the bad publicity with an aggressive ad campaign showingthe consumer products as “made in the USA,” since manufacturing takes place in North Carolina.e. Redesign upholstered furniture to replace ramin contained inside with less expensive recycledplastic. The change in materials would not affect the appearance or durability of the furniture. Thecompany would market the furniture as “sustainable.”f. Pressure current customers to take early delivery of goods before the end of the year so that morerevenue can be reported in this year’s financial statements.g. Begin purchasing sustainable North American hardwoods and sell the Indonesian lumber subsidiary.Initiate a “plant a tree” marketing program, by which the company will plant a tree for every piece offurniture sold. Material costs would increase 25%, and prices would be passed along to customers.h. Sell off production equipment prior to year-end. The sale would result in one-time gains that couldoffset the company’s lagging profits. The owned equipment could be replaced with leased equipmentat a lower cost in the current year.i. Recognize sales revenues on orders received but not shipped as of the end of the year. What should the management accountant do with regard to those items that are in violation of the ethicalstandards for management accountants?

Question

Contemporary Interiors (CI) manufactures
high-quality furniture in factories in North Carolina for sale to top American retailers. In 1995, CI
purchased a lumber operation in Indonesia, and shifted from using American hardwoods to Indonesian ramin
in its products. The ramin proved to be a cheaper alternative, and it was widely accepted by American
consumers. CI management credits the early adoption of Indonesian wood for its ability to keep its North
Carolina factories open when so many competitors closed their doors. Recently, however, consumers have
become increasingly concerned about the sustainability of tropical woods, including ramin. CI has seen
sales begin to fall, and the company was even singled out by an environmental group for boycott. It appears
that a shift to more sustainable woods before year-end will be necessary, and more costly.
In response to the looming increase in material costs, CEO Geoff Armstrong calls a meeting of upper management.
The group generates the following ideas to address customer concerns and/or salvage company
profits for the current year:
a. Pay local officials in Indonesia to “certify” the ramin used by CI as sustainable. It is not certain whether
the ramin would be sustainable or not. Put highly visible tags on each piece of furniture to inform consumers
of the change.
b. Make deep cuts in pricing through the end of the year to generate additional revenue.
c. Record executive year-end bonus compensation accrued for the current year when it is paid in the
next year after the December fiscal year-end.
d. Reject the change in materials. Counter the bad publicity with an aggressive ad campaign showing
the consumer products as “made in the USA,” since manufacturing takes place in North Carolina.
e. Redesign upholstered furniture to replace ramin contained inside with less expensive recycled
plastic. The change in materials would not affect the appearance or durability of the furniture. The
company would market the furniture as “sustainable.”
f. Pressure current customers to take early delivery of goods before the end of the year so that more
revenue can be reported in this year’s financial statements.
g. Begin purchasing sustainable North American hardwoods and sell the Indonesian lumber subsidiary.
Initiate a “plant a tree” marketing program, by which the company will plant a tree for every piece of
furniture sold. Material costs would increase 25%, and prices would be passed along to customers.
h. Sell off production equipment prior to year-end. The sale would result in one-time gains that could
offset the company’s lagging profits. The owned equipment could be replaced with leased equipment
at a lower cost in the current year.
i. Recognize sales revenues on orders received but not shipped as of the end of the year.

What should the management accountant do with regard to those items that are in violation of the ethical
standards for management accountants?

Expert Answer

Want to see the step-by-step answer?

Check out a sample Q&A here.

Want to see this answer and more?

Experts are waiting 24/7 to provide step-by-step solutions in as fast as 30 minutes!*

*Response times may vary by subject and question complexity. Median response time is 34 minutes for paid subscribers and may be longer for promotional offers.
Tagged in
Business
Accounting

Related Accounting Q&A

Find answers to questions asked by students like you.

Q: 3) Below is an absorption income statement for a division of a conglomerate:   Sales                ...

A: Solution  Variable absorption costing income Statement Particulars   Amount in $   Sales (A)   ...

Q: Cost management suggest that currently the focus is on proactive versus reactive management. 1. Desc...

A: Proactive management: It a strategy applied by managers to proactively run the business by preparing...

Q: ) A firm makes & sells bikes & boards operating in north and south regions.                 ...

A: Contribution Margin: The process or theory which is used to judge the benefit given by each unit of ...

Q: Kevan, Jerry, and Dave formed Albee LLC. Jerry and Dave each contributed $245,000 in cash. Kevan con...

A: Answer:  Partner Particulars Basis FMV Loss Gain Kevan Cash 15,000 15,000 0 0   Land 120,000 ...

Q: 8) Given the following data show the DL rate, time and total variances.   Direct labor used 5940 hou...

A: Definition:   Direct labor variances:   The difference between the actual labor cost in the producti...

Q: Margie Johnson is a staff accountant at ToolEx Company, a manufacturer of tools and equipment. The c...

A: Inventory shrinkage: It represents the loss of inventory. In other words, it refers to the differenc...

Q: Sydney Rangers Inc operates remote parking lots near major airports. The board of directors of this ...

A: Solution 1 Plan 1: If company borrows $5 million at 6% then we can calculate new earning per share a...

Q: eBook Show Me How Calculator Print Item The following data were extracted from the income statement ...

A: a. 1.Computation of inventory turnover: Thus, the inventory turnover of current year is 11.20 and f...

Q: The stockholders’ equity section of the balance sheet for Mann Equipment Co. at December 31, 2018, i...

A: In Stock split offers are given to the present investor's in extent of their current offers. It is u...

Q: The following is a partial trial balance for the Green Star Corporation as of December 31, 2021: Acc...

A: Income statement: The financial statement which reports revenues and expenses from business operatio...

Q: Direct, indirect, fixed, and variable costs. California Tires manufactures two types of tires that i...

A: Cost accounting system: Cost accounting system of an organization consists of procedures and techniq...

Q: Kevan, Jerry, and Dave formed Albee LLC. Jerry and Dave each contributed $245,000 in cash. Kevan con...

A: Solution: Partner Particulars Basis FMV Kevan Cash 15,000 15,000   Land 120,000 140,000   D...

Q: Assume that Puritan Corp. operates in an industry for which NOL carryback is allowed. Puritan Corp. ...

A: Operating Loss Carry forward: The operating loss is considered as negative taxable income. When the ...

Q: units               conversion                                                                      ...

A: a. Compute total equivalent units of production for conversion for month as shown below:     Workin...

Q: In this section we have two comprehensive problems. Complete both to be eligible for credit. Problem...

A: 1 and 2 Journalize the given transaction and Present the effects of the stock transactions on Compan...

Q: Under what conditions is it appropriate for a business to use the composite method of depreciation f...

A: Depreciation: Depreciation refers to the reduction in the monetary value of a fixed asset due to its...

Q: Using a perpetual system, the entry to record the sale of merchandise on account includes a  a. Debi...

A: Step 1: The sale of merchandise on account simply means that the goods have been sold on credit. Thi...

Q: Elroy Corporation repurchased 3,800 shares of its own stock for $55 per share. The stock has a par o...

A: Treasury Stock: It refers to the shares that are reacquired by the corporation that is already issue...

Q: Help please

A: Variances help in comparing the actual cost and revenues with the budgeted cost and revenues.  

Q: Jerry Prior, Beeler Corporation’s controller, is concerned that net income may be lower this year. H...

A: a. The Stakeholders involved in this situation are Jerry Prior. Other Accounting staff members like ...

Q: Describe how manufacturing-, merchandising-, and service-sector companies differ from one another.

A: Manufacturing Companies: Merchandiser is a person or organization who buys goods with the purpose of...

Q: Mickelson Inc. owns land that it purchased on January 1, 2000, for $450,000. At December 31, 2020, i...

A: An asset is a resource owned by an entity that has a future benefit attached to it.

Q: Distinguish between the sales order, billing, and AR departments. Why can’t the sales order or AR de...

A: The sales order, billing and AR department are responsible for placing the orders from the customers...

Q: Help please

A: Variance: The amount obtained when the actual cost is deducted from budgeted cost is known as a vari...

Q: I need help working out problems like these. Please explain in detail each step used to complete the...

A: Solution 1: Perpetual LIFO inventory method: According to perpetual LIFO (Last in first out) method ...

Q: Isaac Inc. began operations in January 2021. For some property sales, Isaac recognizes income in the...

A: Taxable income is the measurement of income which is used to calculate the amount of tax that needs ...

Q: Question#5  Match the items in the two columns below by entering the appropriate code letter in the ...

A: Management accounting: Management accounting refers to identifying, measuring, analyzing the financ...

Q: J & G Distilleries makes one of its products by way of three separate stages. Details ofproducti...

A: 1. Prepare the process account for each process as shown below:   Fermenting process account:     D...

Q: Conan O’Brien Logging and Lumber Company owns 3,000 acres of timberland on the north side of Mount L...

A: Step 1 The original cost of timber is $1,650,000. It is obtained by multiplying the number of acres...

Q: Matt Holmes recently joined Klax Company as a staff accountant in the controller’s office. Klax Comp...

A: a. The authoritative guidance for asset impairments is IAS 36. This guidance addresses all accountin...

Q: Six Measures of Solvency or Profitability The following data were taken from the financial statement...

A: Financial Ratios: Financial ratios are the metrics used to evaluate the liquidity, capabilities, pro...

Q: Materials used by the Instrument Division of T_Kong Industries are currently purchased from outside ...

A: Cost accounting is the branch of accounting that inspects the cost structure of a business. This bra...

Q: Five Satins Company purchased a piece of equipment at the beginning of 2017. The equipment cost $430...

A: Click to see the answer

Q: The following are summary cash transactions that occurred during the year for Hilliard Healthcare Co...

A: Cash Flow statement: It is a financial statement prepared by the company to report the cash inflows ...

Q: Presented below is a list of costs and expenses incurred in the factory by Nu-Way Corporation, a man...

A: Direct labor cost: It is the cost of wages paid to the workers is called labor cost. The cost of lab...

Q: Financial and managerial accounting 14th edition by warren, chapter 16, problem 16.9ex solutions for...

A: A. Compute the factory overhead rate for Factory 1.

Q: What steps should a management accountant take if established written policies provide insufficientg...

A: Management accountants are the risk managers, prepare budgets and helps manager in taking various de...

Q: Guitars and more had a large inventory of guitars and other musical instruments. Using the UFO metho...

A: Cost of goods sold as per LIFO. As per LIFO (Last in first out) latest purchased will be sold first....

Q: What are some tips for knowing when accounts are debited and when they are credited? I know that ass...

A: Normal balance: Normal balance refers to the excess of the amount on one side, over the amount on th...

Q: Mary’s Luxury Travel uses a weekly federal income tax withholding table. Refer to Figure 8-4 in the ...

A: Step 1: The computation of taxable earnings are shown below: Note: As per the question, Federal in...

Q: A firm using FIFO had a beginning inventory of $48,000, an ending inventory of $56,000, and a pretax...

A: In determining the cost of goods sold, the opening inventory is added and ending inventory is subtra...

Q: Ratios Analysis: McCormick McCormick & Company, Inc. is one of the world's leading producers of ...

A: Since we only answer up to 3 sub-parts, we’ll answer the first 3. Please resubmit the question and s...

Q: Johnson Electronics manufactures a power supply used in a variety of electronic products, including ...

A: Step 1: Compute the total manufacturing time.

Q: Kelly Clarkson Corporation operates a retail computer store. To improve delivery services to custome...

A:  

Q: Measures of liquidity, Solvency, and Profitability The comparative financial statements of Stargel I...

A: “Hey, since there are multiple ratios asked to calculate, we will calculate first three. If you want...