a.
Introduction: Stakeholder refers to the person or the group of persons who are interested in the business stake or any of the business projects. Stakeholders play an important role in the decision-making process of any company or organization.
The stakeholders of the company in the given situation.
b.
Introduction: Accounting ethics refers to the five important accounting principles i.e., Integrity, objectivity, professional competence &due care, confidentiality, and professional behavior. It shows moral behavior and all the accounting judgments that will apply to accounting.
The ethical issues that are involved in the given case.
c.
Introduction: Accounting ethics refers to the five important accounting principles i.e., Integrity, objectivity, professional competence &due care, confidentiality, and professional behavior. It shows moral behavior and all the accounting judgments that will apply to accounting.
Alternatives actions for Mr. SC in the given situation.
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EBK ACCOUNTING PRINCIPLES
- Roundtree Manufacturing Co. is preparing its year-end financial statements and is considering the accounting for the following items. 1. The vice president of sales had indicated that one product line has lost its customer appeal and will be phased out over the next 3 years. Therefore, a decision has been made to lower the estimated lives on related production equipment from the remaining 5 years to 3 years. 2. The Hightone Building was converted from a sales office to offices for the Accounting Department at the beginning of this year. Therefore, the expense related to this building will now appear as an administrative expense rather than a selling expense on the current year's income statement. 3. Estimating the lives of new products in the Leisure Products Division has become very difficult because of the highly competitive conditions in this market. Therefore, the practice of deferring and amortizing preproduction costs has been abandoned in favor of expensing such costs as they…arrow_forwardDiamond Computers, which is owned and operated by Dale Diamond, manufactures and sells different types of computers. The company has reported profits every year since its inception in 2002 and has applied for a bank loan near the end of 2021 to upgrade manufacturing facilities. These upgrades should significantly boost future productivity and profitability. In preparing the financial statements for the year, the chief accountant, Sandy Walters, mentions to Dale that approximately $80,000 of computer inventory has become obsolete and a write-down of inventory should be recorded in 2021. Dale understands that the write-down would result in a net loss being reported for company operations in 2021. This could jeopardize the company’s application for the bank loan, which would lead to employee layoffs. Dale is a very kind, older gentleman who cares little for his personal wealth but who is deeply devoted to his employees’ well-being. He truly believes the loan is necessary for the company’s…arrow_forwardYou have been appointed as the General Manager of Transoxania Solutions (Pvt) Ltd which is a leading software house. Transoxania Solutions deals in ERP systems and the CRM systems; the firm also develops web based applications for its clients across the globe. The firm is considered to be a good place to work for and experienced a very low turnover rate in the last ten years. In this regard, statistics suggested that from 483 employees, only 06 employees resigned in the past two years. However, training and development had been neglected over the period of time and the recent survey has found that much of the employees are either redundant or are highly overpaid. Now as the General Manager of Transoxania Solutions (Pvt) Ltd, you are required to identify that: a) what kind of change is required at Transoxania Solutions (Pvt) Ltd? b) what issues you may face while implementing the change as the leader of Transoxania (Pvt) Ltd? How will you address the issue pertaining to the resistance…arrow_forward
- Charles worked at Butterfly Corporation for two years after graduating from the University of Texas. He liked his job but the firm was going through some rough times. Because the firm was losing money, Douglas, the CEO, set increasingly rigorous performance goals. Charles noticed a lot of employees were grumbling about these unrealistic expectations. He also heard rumors of quality control incidents and other problems. One day Charles was called into Douglass office. “Hello, Doug. You wanted to see me?” Charles asked. “Yes, Charles. Come in.” Doug looked grim. After Charles sat down, he began to speak. “Look, you know about the tough times we are in. We are losing money left and right. So far I’ve been able to keep this company afloat by drastically making cuts and speeding up production. I guess in all this cost-cutting, there have been problems that have come up. A lot of people have called the hotline to complain about ethical problems, such as employees cutting corners to make…arrow_forwardReeve Lumber Company has a small information systems department consisting of five people. A backlog of approximately 15 months exists for requests for new systems applications to even be considered. Both information users and systems personnel are unhappy with this state of affairs. The users feel that the systems department is not responsive enough to their needs, while the systems personnel feel overworked, frustrated, and unappreciated.Janet Hubert, the manager of the systems department, has decided that she needs to take a proactive measure. She is requesting the funds to purchase a CASE system for approximately $75,000 that takes about 2 months to install and train workers how to use it. The president of the company, Mike Cassidy, initially responded by questioning the wisdom of taking the systems personnel away from their duties when they are backlogged so they can learn a system. Prepare a memo from Hubert to Cassidy. In the memo, outline the expected benefits of purchasing and…arrow_forwardA payday loan company has decided to open several new locations in a city and hires consultants to decide where to open these locations. The consultants are paid per store that is opened, and at the end of the quarter, the company notices a many of the new stores' sales volume fail to meet expectations. To incentivize the consultants to instead focus on opening profitable stores, the company decided to alter the compensation to a percentage of the profit earned per new store. This puts the consultants_ and the payday loan company should expect to compensate for this change. to Group of answer choices 1. In a less risky position; pay the consultants more than they would in the per- store scheme 2. A more risky position; pay the consultants less than they would in the per- store scheme 3. In a less risky position; pay the consultants less than they would in the per- store scheme 4. A more risky position; pay the consultants more than they would in the per- store schemearrow_forward
- 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…arrow_forwardArcadia Plastics follows the philosophy of transferring employees from job to job within the company. Management believes the job rotation deters employees from feeling that they are stagnating in their jobs and promotes a better understanding of the company. A computer services employee typically works for six months as a data librarian, one year as systems developer, six months as a database administrator, and one year in systems maintenance. At that point, he or she is assigned to a permanent position. Required: Discuss the importance of separation of duties within the information systems department. How can Arcadia Plastics have both rotation and well-separated duties?arrow_forwardSuppose that Kicker had the following sales and cost experience (in thousands of dollars) for May of the current year and for May of the prior year: In May of the prior year, Kicker started an intensive quality program designed to enable it to build original equipment manufacture (OEM) speaker systems for a major automobile company. The program was housed in research and development. In the beginning of the current year, Kickers accounting department exercised tighter control over sales commissions, ensuring that no dubious (e.g., double) payments were made. The increased sales in the current year required additional warehouse space that Kicker rented in town. (Round ratios to four decimal places. Round sales dollars computations to the nearest dollar.) Required: 1. Calculate the contribution margin ratio for May of both years. 2. Calculate the break-even point in sales dollars for both years. 3. Calculate the margin of safety in sales dollars for both years. 4. CONCEPTUAL CONNECTION Analyze the differences shown by your calculations in Requirements 1, 2, and 3.arrow_forward
- At the beginning of the last quarter of 20x1, Youngston, Inc., a consumer products firm, hired Maria Carrillo to take over one of its divisions. The division manufactured small home appliances and was struggling to survive in a very competitive market. Maria immediately requested a projected income statement for 20x1. In response, the controller provided the following statement: After some investigation, Maria soon realized that the products being produced had a serious problem with quality. She once again requested a special study by the controllers office to supply a report on the level of quality costs. By the middle of November, Maria received the following report from the controller: Maria was surprised at the level of quality costs. They represented 30 percent of sales, which was certainly excessive. She knew that the division had to produce high-quality products to survive. The number of defective units produced needed to be reduced dramatically. Thus, Maria decided to pursue a quality-driven turnaround strategy. Revenue growth and cost reduction could both be achieved if quality could be improved. By growing revenues and decreasing costs, profitability could be increased. After meeting with the managers of production, marketing, purchasing, and human resources, Maria made the following decisions, effective immediately (end of November 20x1): a. More will be invested in employee training. Workers will be trained to detect quality problems and empowered to make improvements. Workers will be allowed a bonus of 10 percent of any cost savings produced by their suggested improvements. b. Two design engineers will be hired immediately, with expectations of hiring one or two more within a year. These engineers will be in charge of redesigning processes and products with the objective of improving quality. They will also be given the responsibility of working with selected suppliers to help improve the quality of their products and processes. Design engineers were considered a strategic necessity. c. Implement a new process: evaluation and selection of suppliers. This new process has the objective of selecting a group of suppliers that are willing and capable of providing nondefective components. d. Effective immediately, the division will begin inspecting purchased components. According to production, many of the quality problems are caused by defective components purchased from outside suppliers. Incoming inspection is viewed as a transitional activity. Once the division has developed a group of suppliers capable of delivering nondefective components, this activity will be eliminated. e. Within three years, the goal is to produce products with a defect rate less than 0.10 percent. By reducing the defect rate to this level, marketing is confident that market share will increase by at least 50 percent (as a consequence of increased customer satisfaction). Products with better quality will help establish an improved product image and reputation, allowing the division to capture new customers and increase market share. f. Accounting will be given the charge to install a quality information reporting system. Daily reports on operational quality data (e.g., percentage of defective units), weekly updates of trend graphs (posted throughout the division), and quarterly cost reports are the types of information required. g. To help direct the improvements in quality activities, kaizen costing is to be implemented. For example, for the year 20x1, a kaizen standard of 6 percent of the selling price per unit was set for rework costs, a 25 percent reduction from the current actual cost. To ensure that the quality improvements were directed and translated into concrete financial outcomes, Maria also began to implement a Balanced Scorecard for the division. By the end of 20x2, progress was being made. Sales had increased to 26,000,000, and the kaizen improvements were meeting or beating expectations. For example, rework costs had dropped to 1,500,000. At the end of 20x3, two years after the turnaround quality strategy was implemented, Maria received the following quality cost report: Maria also received an income statement for 20x3: Maria was pleased with the outcomes. Revenues had grown, and costs had been reduced by at least as much as she had projected for the two-year period. Growth next year should be even greater as she was beginning to observe a favorable effect from the higher-quality products. Also, further quality cost reductions should materialize as incoming inspections were showing much higher-quality purchased components. Required: 1. Identify the strategic objectives, classified by the Balanced Scorecard perspective. Next, suggest measures for each objective. 2. Using the results from Requirement 1, describe Marias strategy using a series of if-then statements. Next, prepare a strategy map. 3. Explain how you would evaluate the success of the quality-driven turnaround strategy. What additional information would you like to have for this evaluation? 4. Explain why Maria felt that the Balanced Scorecard would increase the likelihood that the turnaround strategy would actually produce good financial outcomes. 5. Advise Maria on how to encourage her employees to align their actions and behavior with the turnaround strategy.arrow_forwardConsider 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?arrow_forwardMalone Industries has been in business for five years and has been very successful. In the past year, it expanded operations by buying Hot Metal Manufacturing for a price greater than the value of the net assets purchased. In the past year, the customer base has expanded much more than expected, and the companys owners want to increase the goodwill account. Your CPA firm has been hired to help Malone prepare year-end financial statements, and your boss has asked you to talk to Malones managers about goodwill and whether an adjustment can be made to the goodwill account. How do you respond to the owners and managers?arrow_forward
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