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Chapter 16: 8RQ (page 884)
How do manufacturing companies differ from merchandising companies?
The manufacturing company sells the product made by themselves and merchandising company sells the product purchased from suppliers.
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The Institute of Management Accountants鈥� Statement of Ethical Professional Practice requires managerial accountants to meet standards regarding competence, confidentiality, integrity, and credibility. Consider the following situations. Which standard(s) is(are) violated in each situation?
e. You do not provide top management with the detailed job descriptions they requested because you fear they may use this information to cut a position in your department.
Question:Applying ethical standards
Natalia Wallace is the new controller for Smart Software, Inc. which develops and sells education software. Shortly before the December 31 fiscal year-end, James Cauvet, the company president, asks Wallace how things look for the year-end numbers. He is not happy to learn that earnings growth may be below 13% for the first time in the company鈥檚 five-year history. Cauvet explains that financial analysts have again predicted a 13% earnings growth for the company and that he does not intend to disappoint them. He suggests that Wallace talk to the assistant controller, who can explain how the previous controller dealt with such situations. The assistant controller suggests the following strategies:
a. Persuade suppliers to postpone billing \(13,000 in invoices until January 1.
b. Record as sales \)115,000 in certain software awaiting sale that is held in a public warehouse.
c. Delay the year-end closing a few days into January of the next year so that some of the next year鈥檚 sales are included in this year鈥檚 sales.
d. Reduce the estimated Bad Debts Expense from 5% of Sales Revenue to 3%, given the company鈥檚 continued strong performance.
e. Postpone routine monthly maintenance expenditures from December to January.
Requirements
1. Which of these suggested strategies are inconsistent with IMA standards?
2. How might these inconsistencies affect the company鈥檚 creditors and stockholders?
3. What should Wallace do if Cauvet insists that she follow all of these suggestions?
Identify the following characteristics as primarily related to financial accounting (FA) or managerial accounting (MA):
3. Is not required to follow GAAP.
Preparing a schedule of cost of goods manufactured Wilson Corp., a lamp manufacturer, provided the following information for the year ended December 31, 2018:
Balances: Beginning Ending
Direct Materials \( 59,000 \) 23,000
Work-in-Process Inventory 109,000 62,000
Finished Goods Inventory 41,000 44,000
Other information:
Depreciation, plant building and equipment $ 16,000
Direct materials purchases 151,000
Insurance on plant 24,000
Sales salaries 47,000
Repairs and maintenance鈥攑lant 10,000
Indirect labor 39,000
Direct labor 121,000
Administrative expenses 60,000
Requirements 2. What is the unit product cost if Wilson manufactured 3,700 lamps for the year?
Identifying product costs and period costs Classify each cost of a paper manufacturer as either a product cost or a period cost:
b. Cost of computer software to track WIP Inventory
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