Horngren's Cost Accounting: A Managerial Emphasis (16th Edition)
16th Edition
ISBN: 9780134475585
Author: Srikant M. Datar, Madhav V. Rajan
Publisher: PEARSON
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Chapter 1, Problem 1.27E
Professional ethics and reporting division performance. Hannah Gilpin is the controller of Blakemore Auto Glass, a division of Eastern Glass and Window. Blakemore replaces and installs windshields. Her division has been under pressure to improve its divisional operating income Currently divisions of Eastern Glass are allocated corporate overhead based on cost of goods sold. Jake Myers, the president of the division, has asked Gilpin to reclassify $50,000 of installation labor, which is included in cost of goods sold, as administrative labor, which is not. Doing so will save the division $20,000 in allocated corporate overhead. The labor costs in question involve installation labor provided by trainee employees. Myers argues, “the trainees are not as efficient as regular employees so this is unfairly inflating our cost of goods sold. This is really a cost of training (administrative labor) not part of cost of goods sold.” Gilpin does not see a reason for reclassification of the costs, other than to avoid overhead allocation costs.
- 1. Describe Gilpin’s ethical dilemma.
Required
- 2. What should Gilpin do if Myers gives her a direct order to reclassify the costs?
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Professional ethics and reporting division performance. Hannah Gilpin is the controller of Blakemore Auto Glass, a division of Eastern Glass and Window. Blakemore replaces and installs windshields. Her division has been under pressure to improve its divisional operating income. Currently, divisions of Eastern Glass are allocated corporate overhead based on cost of goods sold. Jake Myers, the president of the division, has asked Gilpin to reclassify $50,000 of installation labor, which is included in cost of goods sold, as administrative labor, which is not. Doing so will save the division $20,000 in allocated corporate overhead. The labor costs in question involve installation labor provided by trainee employees. Myers argues, “the trainees are not as efficient as regular employees so this is unfairly inflating our cost of goods sold. This is really a cost of training (administrative labor) not part of cost of goods sold.” Gilpin does not see a reason for reclassification of the…
Chapter 1 Solutions
Horngren's Cost Accounting: A Managerial Emphasis (16th Edition)
Ch. 1 - How does management accounting differ from...Ch. 1 - Management accounting should not fit the...Ch. 1 - How can a management accountant help formulate...Ch. 1 - Describe the business functions in the value...Ch. 1 - Explain the term supply chain and its importance...Ch. 1 - Management accounting deals only with costs. Do...Ch. 1 - How can management accountants help improve...Ch. 1 - Prob. 1.8QCh. 1 - Prob. 1.9QCh. 1 - What three guidelines help management accountants...
Ch. 1 - Prob. 1.11QCh. 1 - Prob. 1.12QCh. 1 - Prob. 1.13QCh. 1 - Prob. 1.14QCh. 1 - Prob. 1.15QCh. 1 - Which of the following is not a primary function...Ch. 1 - Value chain and classification of costs, computer...Ch. 1 - Prob. 1.18ECh. 1 - Value chain and classification of costs, fast-food...Ch. 1 - Key success factors. Dominion Consulting has...Ch. 1 - Key success factors. Vargas Construction Company...Ch. 1 - Planning and control decisions. Gregor Company...Ch. 1 - Planning and control decisions. Gavin Adams is the...Ch. 1 - Prob. 1.24ECh. 1 - Five-step decision-making process, service firm....Ch. 1 - Professional ethics and reporting division...Ch. 1 - Professional ethics and reporting division...Ch. 1 - Planning and control decisions, Internet company....Ch. 1 - Prob. 1.29PCh. 1 - Prob. 1.30PCh. 1 - Management accounting guidelines. For each of the...Ch. 1 - Prob. 1.32PCh. 1 - Prob. 1.33PCh. 1 - Budgeting, ethics, pharmaceutical company. Chris...Ch. 1 - Professional ethics and end-of-year actions. Linda...Ch. 1 - Professional ethics and end-of-year actions....Ch. 1 - Ethical challenges, global company environmental...
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