The controller of a retail company has just had a $50,000 request to implement an ABC system quickly turned down. A senior vice president, in rejecting the request, noted, “Given a choice, I will always prefer a $50,000 investment in improving things a customer sees or experiences, such as our shelves or our store layout. How does a customer benefit by our spending $50,000 on a supposedly better accounting system?” How should the controller respond?
Q: A large retailer is going to run an experiment at one of its stores to see how cost effective it…
A: given:
Q: he operations vice president of Security Home Bank has been interested in investigating the…
A: The following calculations are done in the records of the Westfield Branch of Security Home Bank…
Q: The controller of a retail company has just had a $50,000 request turned down toimplement an ABC…
A: Activity-Based Costing Systems Activity-based Costing is defined as the method of costing in which…
Q: Based on a cost-benefit analysis, management at First CommunityBank decided to contract with…
A: Cost-benefit analysis is a process wherein analysts add all the benefits associated with the…
Q: Top-Quality Stores, Inc., owns a nationwide chain of supermarkets. The company is going to open…
A: Net Present Value or NPV is a technique which determines the net present value of the project and it…
Q: g skills regarding screening and preference methods to decide on the best system for the company.…
A: Introduction: The time value of money states that the value of today's dollar in more than the value…
Q: 'ou are a manager at Northern Fibre, which is considering expanding its operations in synthetic…
A: Here, Cost of Project is $24 millions Net Income of Project is $4.732 million Depreciation is 2.400…
Q: nseca, Ruiz, and Dunn is a large, local accounting firm located in a southwestern city. Carlos Ruiz,…
A: Note: “Since you have posted a question with multiple sub-parts, we will solve first three sub-parts…
Q: Ella Maksimov is CEO of her own marketing firm. The firm recently moved from a strip mall in the…
A: The relevant cost in a decision making include those cost which would entail additional outflow of…
Q: You are considering entering the shoe business. You believe that you have a narrow window for…
A: Calculate the stock price after adjusting for dividend as follows:
Q: Suppose that you have been given a summer job as an intern at Issac Aircams, a company that man-…
A: Product costs are those costs which are incurred for manufacturing the product and can be traced to…
Q: Nunez Corporation runs two convenience stores, one in Connecticut and one in Rhode Island. Operating…
A: Avoidable costs are those, which could be reduced by choosing one course of action over other;…
Q: Howard Rockness was worried. His company, Rockness Bottling, showed declining profits over the past…
A: Activity based costing (ABC) is the costing method which allocates the overheads (activity…
Q: It's Your Turn. Show Us What You Know Shannon's Brewery in Keller, Texas is considering using a…
A: Let the level of sales be ‘$ X’. At $ X level, the cost of hiring outside sales force and cost of…
Q: Home Builder Supply, a retailer in the home improvement industry, currently operates seven retail…
A: The question is based on the concept of capital budgeting and the process of capital investment…
Q: a retailer in the home improvement industry, currently operates seven retail outlets in Manama and…
A: A retailer in the home improvement industry, currently operates seven retail outlets in Manama and…
Q: The operations vice-president of the Regal Bank of Canada, Kristin Wu, has been interested in…
A: ABC analysis means activity based costing where cost is divided between various branches or…
Q: Safa traders is a wholesale business unit based in Salala. The company is dealing with disposable…
A: Given that, Annual demand = 5000 units Ordering cost = OMR20 per order holding cost per unit = 10…
Q: Safa traders is a wholesale business unit based in Salala. The company is dealing with disposable…
A: Economic order quantity refers to the quantity that should be ordered to minimize the total ordering…
Q: Lygon Food Distributors (LFD) hired a consultant to update its system for reporting the cost of…
A: Pricing Decisions: Businesses have pricing options when determining how much to charge for their…
Q: Customers always say they are very satisfied with ABC's products, and the business has won quality…
A: The balanced scorecard is an administration system pointed toward translating an organization's…
Q: Ethics and the Manager Richmond. Inc., operates a chain of 44 department stores. Two years ago, the…
A: 1.
Q: I need help with this: Certain operating information is shown below for Palmer Department Store:…
A: a) Calculation of contribution is shown in excel sheet using the following formulas:
Q: Muscat Tubes Manufacturing LLC is a manufacturer of television picture tubes. The company must keep…
A: ABC analysis basically helps an organization to manage its inventory it basically works by…
Q: A Company is seeking financial advice as to whether to replace its old equipment. Some of its…
A: NPV is a capital budgeting method by which we can decide that whether we should go ahead with the…
Q: Jade Ltd is now considering how to obtain a computer software. The director of Jade Ltd has noticed…
A: Here intangible asset is recognized for internally generating asset
Q: Please show all equations and work as needed. If possible, please type the work so that it may be…
A: Calculation of Value of Call:The value of call is $3.54.Excel Spreadsheet:
Q: A Company is seeking financial advice as to whether to replace its old equipment. Some of its…
A: Answer 31)
Q: Two years ago the manager of a large department store purchased new bar code scanners costing…
A:
Q: A corporation has an excess input VAT due to its excessive local purchases of goods and services.…
A: VAT is a consumption tax on products and services levied at each level of the supply chain where…
Q: You are a manager at Northem Fibre, which is considering expanding its operations in synthetic fibre…
A: Free Cash Flow: It is the amount by which operating cash flow of business exceeds its working…
Q: Carni’s boss stated that after reviewing first-quarter earnings, the companydecided to invest in…
A: Capital Budgeting is an art of analyzing the investment that worth's more than that it costs to…
Q: Consider the following series of independentsituations in which a firm is about to make a strategic…
A: 1. In Situation 1, when the business is focusing on cost reduction it is following the cost…
Q: The chief executive officer (CEO) of Cobalt Inc. just read an article written by a business…
A: Lean manufacturing focuses on reducing the cost and minimizing waste involved in the manufacturing,…
Q: A manager in your organization just received a special order at a price that is “below cost.” The…
A: This is the case of a ‘special order’. In accounting we consider special orders as those one off…
Q: Howard Rockness was worried. His company, Rockness Bottling, showed declining profits over the past…
A: The answer is given below:
Q: Infinity Designs, an interior design company, has experienced a drop in business due to an increase…
A: Given:
Q: Rock Designs, Inc. is a jewelry store located in Miramar Beach, Florida. After Valentine’s Day, the…
A: (1)
Q: Darren Mack owns the Gas n’ Go convenience store and gas station. After hearing a marketing lecture,…
A: Given, The cost of each pump is $95,000 Customers increased to 12000 per year Number of pumps…
Q: The controller of a retail company has just had a $50,000 request to implement an ABC system quickly…
A: Activity based costing system is a costing system in which all indirect costs or overhead costs are…
Q: Suppose that you have been given a summer job as an intern at Issac Aircams, a company that…
A: Product cost: Product costs are quite simply the costs incurred to make a product. Generally,…
Q: ABC Airlines is a commercial airline that targets business and nonbusiness travelers. In recent…
A: The profits can be arrived from the income statement of the company. All the revenues, and expenses…
Q: Howard Rockness was worried. His company, Rockness Bottling, showed declining profits over the past…
A: Units costs are the cost for one product. They are computed by dividing total cost with number of…
Q: You are a manager at Northern Fibre, which is considering expanding its operations in synthetic…
A: Net Present Value (NPV): Net present value is defined as the summation of the present value of cash…
The controller of a retail company has just had a $50,000 request to implement an ABC system quickly turned down. A senior vice president, in rejecting the request, noted, “Given a choice, I will always prefer a $50,000 investment in improving things a customer sees or experiences, such as our shelves or our store layout. How does a customer benefit by our spending $50,000 on a supposedly better accounting system?” How should the controller respond?
Trending now
This is a popular solution!
Step by step
Solved in 4 steps
- Consider the following conversation between Leonard Bryner, president and manager of a firm engaged in job manufacturing, and Chuck Davis, certified management accountant, the firms controller. Leonard: Chuck, as you know, our firm has been losing market share over the past 3 years. We have been losing more and more bids, and I dont understand why. At first, I thought that other firms were undercutting simply to gain business, but after examining some of the public financial reports, I believe that they are making a reasonable rate of return. I am beginning to believe that our costs and costing methods are at fault. Chuck: I cant agree with that. We have good control over our costs. Like most firms in our industry, we use a normal job-costing system. I really dont see any significant waste in the plant. Leonard: After talking with some other managers at a recent industrial convention, Im not so sure that waste by itself is the issue. They talked about activity-based management, activity-based costing, and continuous improvement. They mentioned the use of something called activity drivers to assign overhead. They claimed that these new procedures can help to produce more efficiency in manufacturing, better control of overhead, and more accurate product costing. A big deal was made of eliminating activities that added no value. Maybe our bids are too high because these other firms have found ways to decrease their overhead costs and to increase the accuracy of their product costing. Chuck: I doubt it. For one thing, I dont see how we can increase product-costing accuracy. So many of our costs are indirect costs. Furthermore, everyone uses some measure of production activity to assign overhead costs. I imagine that what they are calling activity drivers is just some new buzzword for measures of production volume. Fads in costing come and go. I wouldnt worry about it. Ill bet that our problems with decreasing sales are temporary. You might recall that we experienced a similar problem about 12 years agoit was 2 years before it straightened out. Required: 1. Do you agree or disagree with Chuck Davis and the advice that he gave Leonard Bryner? Explain. 2. Was there anything wrong or unethical in the behavior that Chuck Davis displayed? Explain your reasoning. 3. Do you think that Chuck was well informedthat he was aware of the accounting implications of ABC and that he knew what was meant by cost drivers? Should he have been well informed? Review (in Chapter 1) the first category of the Statement of Ethical Professional Practice for management accountants. Do any of these standards apply in Chucks case?Cost Information and Ethical Behavior, Service Organization Jean Erickson, manager and owner of an advertising company in Charlotte, North Carolina, arranged a meeting with Leroy Gee, the chief accountant of a large, local competitor. The two are lifelong friends. They grew up together in a small town and attended the same university. Leroy is a competent, successful accountant but is having some personal financial difficulties after some of his investments turned sour, leaving him with a 15,000 personal loan to pay offjust when his oldest son is starting college. Jean, on the other hand, is struggling to establish a successful advertising business. She had recently acquired the rights to open a branch office of a large regional advertising firm headquartered in Atlanta, Georgia. During her first 2 years, she was able to build a small, profitable practice. However, the chance to gain a significant foothold in Charlotte hinged on the success of winning a bid to represent the state of North Carolina in a major campaign to attract new industry and tourism. The meeting she had scheduled with Leroy concerned the bid she planned to submit. Jean: Leroy, Im at a critical point in my business venture. If I can win the bid for the states advertising dollars, Ill be set. Winning the bid will bring 600,000 to 700,000 of revenues into the firm. On top of that, I estimate that the publicity will bring another 200,000 to 300,000 of new business. Leroy: I understand. My boss is anxious to win that business as well. It would mean a huge increase in profits for my firm. Its a competitive business, though. As new as you are, I doubt that youll have much chance of winning. Jean: Youre forgetting two very important considerations. First, I have the backing of all the resources and talent of a regional firm. Second, I have some political connections. Last year, I was hired to run the publicity side of the governors campaign. He was impressed with my work and would like me to have this business. I am confident that the proposals I submit will be very competitive. My only concern is to submit a bid that beats your firm. If I come in with a lower bid and good proposals, the governor can see to it that I get the work. Leroy: Sounds promising. If you do win, however, there will be a lot of upset people. After all, they are going to claim that the business should have been given to local advertisers, not to some out-of-state firm. Given the size of your office, youll have to get support from Atlanta. You could take a lot of heat. Jean: True. But I am the owner of the branch office. That fact alone should blunt most of the criticism. Who can argue that Im not a local? Listen, with your help, I think I can win this bid. Furthermore, if I do win it, you can reap some direct benefits. With that kind of business, I can afford to hire an accountant, and Ill make it worthwhile for you to transfer jobs. I can offer you an up-front bonus of 15,000. On top of that, Ill increase your annual salary by 20%. That should solve most of your financial difficulties. After all, we have been friends since day oneand what are friends for? Leroy: Jean, my wife would be ecstatic if I were able to improve our financial position as quickly as this opportunity affords. I certainly hope that you win the bid. What kind of help can I provide? Jean: Simple. To win, all I have to do is beat the bid of your firm. Before I submit my bid, I would like you to review it. With the financial skills you have, it should be easy for you to spot any excessive costs that I may have included. Or perhaps I included the wrong kind of costs. By cutting excessive costs and eliminating costs that may not be directly related to the project, my bid should be competitive enough to meet or beat your firms bid. Required: 1. What would you do if you were Leroy? Fully explain the reasons for your choice. What do you suppose the code of conduct for Leroys company would say about this situation? 2. What is the likely outcome if Leroy agrees to review the bid? Is there much risk to him personally if he reviews the bid? Should the degree of risk have any bearing on his decision?Bannister Company, an electronics firm, buys circuit boards and manually inserts various electronic devices into the printed circuit board. Bannister sells its products to original equipment manufacturers. Profits for the last two years have been less than expected. Mandy Confer, owner of Bannister, was convinced that her firm needed to adopt a revenue growth and cost reduction strategy to increase overall profits. After a careful review of her firms condition, Mandy realized that the main obstacle for increasing revenues and reducing costs was the high defect rate of her products (a 6 percent reject rate). She was certain that revenues would grow if the defect rate was reduced dramatically. Costs would also decline as there would be fewer rejects and less rework. By decreasing the defect rate, customer satisfaction would increase, causing, in turn, an increase in market share. Mandy also felt that the following actions were needed to help ensure the success of the revenue growth and cost reduction strategy: a. Improve the soldering capabilities by sending employees to an outside course. b. Redesign the insertion process to eliminate some of the common mistakes. c. Improve the procurement process by selecting suppliers that provide higher-quality circuit boards. Required: 1. State the revenue growth and cost reduction strategy using a series of cause-and-effect relationships expressed as if-then statements. 2. Illustrate the strategy using a strategy map. 3. Explain how the revenue growth strategy can be tested. In your explanation, discuss the role of lead and lag measures, targets, and double-loop feedback.
- Consider the following conversation between Gary Means, manager of a division that produces industrial machinery, and his controller, Donna Simpson, a certified management accountant and certified public accountant: Gary: Donna, we have a real problem. Our operating cash is too low, and we are in desperate need of a loan. As you know, our financial position is marginal, and we need to show as much income as possibleand our assets need bolstering as well. Donna: I understand the problem, but I dont see what can be done at this point. This is the last week of the fiscal year, and it looks like well report income just slightly above breakeven. Gary: I know all this. What we need is some creative accounting. I have an idea that might help us, and I wanted to see if you would go along with it. We have 200 partially finished machines in process, about 20% complete. That compares with the 1,000 units that we completed and sold during the year. When you computed the per-unit cost, you used 1,040 equivalent units, giving us a manufacturing cost of 1,500 per unit. That per-unit cost gives us cost of goods sold equal to 1.5 million and ending work in process worth 60,000. The presence of the work in process gives us a chance to improve our financial position. If we report the units in work in process as 80% complete, this will increase our equivalent units to 1,160. This, in turn, will decrease our unit cost to about 1,345 and cost of goods sold to 1.345 million. The value of our work in process will increase to 215,200. With those financial stats, the loan would be a cinch. Donna: Gary, I dont know. What youre suggesting is risky. It wouldnt take much auditing skill to catch this one. Gary: You dont have to worry about that. The auditors wont be here for at least 6 to 8 more weeks. By that time, we can have those partially completed units completed and sold. I can bury the labor cost by having some of our more loyal workers work overtime for some bonuses. The overtime will never be reported. And, as you know, bonuses come out of the corporate budget and are assigned to overheadnext years overhead. Donna, this will work. If we look good and get the loan to boot, corporate headquarters will treat us well. If we dont do this, we could lose our jobs. Required: 1. Should Donna agree to Garys proposal? Why or why not? To assist in deciding, review the corporate code of ethics standards described in Chapter 1. Do any apply? 2. Assume that Donna refuses to cooperate and that Gary accepts this decision and drops the matter. Does Donna have any obligation to report the divisional managers behavior to a superior? Explain. 3. Assume that Donna refuses to cooperate; however, Gary insists that the changes be made. Now what should she do? What would you do? 4. Suppose that Donna is 63 and that the prospects for employment elsewhere are bleak. Assume again that Gary insists that the changes be made. Donna also knows that his supervisor, the owner of the company, is his father-in-law. Under these circumstances, would your recommendations for Donna differ?The controller of a retail company has just had a $50,000 request to implement an ABC system quickly turned down. A senior vice president, in rejecting the request, noted, "Given a choice, I will always prefer a $50,000 investment in improving things a customer sees or experiences, such as our shelves or our store layout. How does a customer benefit by our spending $50,000 on a supposedly better accounting system?" Question: How should the controller respond?The controller of a retail company has just had a $50,000 request turned down toimplement an ABC system. A senior vice president, in rejecting the request, noted,“Given a choice, I will always prefer a $50,000 investment in improving things acustomer sees or experiences, such as our shelves or our store layout. How does acustomer benefit by our spending $50,000 on a supposedly better accounting system?”How should the controller respond?
- As a recent hire of B-Well, your job is to evaluate whether the company should open a traditional grocery store in Astoria or start online shopping option instead. Before deciding which project to undertake, the Board of Directors has already agreed that they will hire a consultant to verify their decision. The consultant is charging $16, 580 total. They have also agreed that they will hire an NYC marketing agency to promote B-Well's reputation. They are not sure what the charge will be for the marketing services. For now, they just have to decide which project they will undertake. Brick & Mortar Store. B-Well Health Mart has to rent and renovate a space in Astoria. The estimates for the up-front renovation costs range from $2,250,000 to $2,650,000 to be depreciated over the life of the project using straight-line with a zero salvage value. There is a foreclosed warehouse in the area that their lenders are offering at a large discount since the lenders are losing money on it. The…A large brokerage company is assessing the introduction of a new computer system to improve routing and execution of customer orders. The managing director wants to install a new Smart Routing system, whereas another director prefers the Direct Routing system. Each machine provides the same order-execution ability and can satisfy the broker’s obligation to give investors the best possible order execution. The initial cost of each system is $170,000, but because of differing software, maintenance, and processing requirements, estimates of the after-tax costs of operation differ. These are as follows: Period Smart Routing Direct Routing 1 39,000 56,000 2 48,000 61,000 3 48,000 61,000 4…Richmond, Inc., operates a chain of 44 department stores. Two years ago, the board of directors of Richmond approved a large-scale remodeling of its stores to attract a more upscale clientele. Before finalizing these plans, two stores were remodeled as a test. Linda Perlman, assistant controller, was asked to oversee the financial reporting for these test stores, and she and other management personnel were offered bonuses based on the sales growth and profitability of these stores. While completing the financial reports, Perlman discovered a sizable inventory of outdated goods that should have been discounted for sale or returned to the manufacturer. She discussed the Situation with her management colleagues; the consensus was to ignore reporting this inventory as obsolete because reporting it would diminish the financial results and their bonuses. Required: According to the IMA’s Statement of Ethical Professional Practice, would it be ethical for Perlman not to report the inventory…
- Ethics and the ManagerRichmond, Inc., operates a chain of 44 department stores. Two years ago, the board of directors of Richmond approved a large-scale remodelling of its stores to attract a more upscale clientele.Before finalizing these plans, two stores were remodelled as a test. Linda Perlman, assistant controller, was asked to oversee the financial reporting for these test stores, and she and other management personnel were offered bonuses based on the sales growth and profitability of these stores. While completing the financial reports, Perlman discovered a sizable inventory of outdated goods that should have been discounted for sale or returned to the manufacturer. She discussed the situation with her management colleagues; the consensus was to ignore reporting this inventory as obsolete because reporting it would diminish the financial results and their bonuses.1. Managerial Accounting2. Would it be easy for Perlman to take the ethical action in this situation?Howard Rockness was worried. His company, Rockness Bottling, showed declining profits over the past several years despite an increase in revenues. With profits declining and revenues increasing, Rockness knew there must be a problem with costs. Rockness sent an e-mail to his executive team under the subject heading, “How do we get Rockness Bottling back on track?” Meeting in Rockness’s spacious office, the team began brainstorming solutions to the declining profits problem. Some members of the team wanted to add products. (These were marketing people.) Some wanted to fire the least efficient workers. (These were finance people.) Some wanted to empower the workers. (These people worked in the human resources department.) And some people wanted to install a new computer system. (It should be obvious who these people were.) Rockness listened patiently. When all participants had made their cases, Rockness said, “We made money when we were a smaller, simpler company. We have grown,…Howard Rockness was worried. His company, Rockness Bottling, showed declining profits over the past several years despite an increase in revenues. With profits declining and revenues increasing, Rockness knew there must be a problem with costs. Rockness sent an e-mail to his executive team under the subject heading, “How do we get Rockness Bottling back on track?” Meeting in Rockness’s spacious office, the team began brainstorming solutions to the declining profits problem. Some members of the team wanted to add products. (These were marketing people.) Some wanted to fire the least efficient workers. (These were finance people.) Some wanted to empower the workers. (These people worked in the human resources department.) And some people wanted to install a new computer system. (It should be obvious who these people were.) Rockness listened patiently. When all participants had made their cases, Rockness said, “We made money when we were a smaller, simpler company. We have grown, added…