As manager of the waste treatment facility for the city of Columbus Park, Illinois. Ann Paxton is in the process of preparing an annual expense Budget. While eating lunch at her desk, she thought about the coming year. "Next year, my department will probably be asked to process some 9,000,000 gallons of waste. Our variable costs are about $.20 per gallon, and our fixed costs are about $2,400,000. So, the total cost should be somewhere around $4,200,000. I better submit a budget of around $4,900,000. The city's tax revenue s are down and the city controller wall probably reduce whatever budget I submit by 10 percent. And what if I end up incurring higher expenses than anticipated? A new labor contract, for instance, could increase costs by more than $300,000. Or waste could be 500,000 gallons higher than estimated. The last thing I want is to incur more costs than budgeted. I've got to stay within budget to have any chance for a promotion out of this stinking department!"

Required

Discuss whether it is ethical for Ann to submit a budget for an amount higher than the cost expected to be incurred.

Please follow the instructions below. I have also attached an example to demonstrate format and the scope of writing. Please make to include any sources used as citations in footnotes. This should be a word document.

Complete Chapter 10, Case1 from the Jiambalvo textbookCompleteindividually as anessay or narrative, not as answers to questions or as a problem. Calculations may be necessary to illustrate the issue or to support conclusionsIncludeanexecutivesummary,overviewofsituation,issuesaddressed,suggestedresolution,andconclusion.Theoverviewneednotcontainacompleterestatementofthecase,justenoughbackgroundforareadernotfamiliarwiththecasetofollowthenarrativePaper should be one or two single-spaced pages using 11 pt. font and excluding any titles or supplements Executive Summary This paper provides an analytical evaluation of the constraint/s intervening with the production process for the Model C210 and the Model D400 of the Five Star Tools product line. The remarkable growth the company has experienced in the past two years has led to a strain on the firm's production capacity. Management has identified the final stage of production as the bottleneck, or the binding constraint of production. This paper aims to ascertain how to loosen constraints on production and identify the most profitable product line in light of the current production concerns. Lastly an incremental analysis will be used to evaluate both the benefit of one additional hour of production time in the coating and sharpening process and the incremental yearly profit associated with adding a new inspection station. However, before I begin with the analysis; I will first provide a brief overview of the Five Star Tools situation. Overview of the Situation Five Star Tools is a small family owned firm that manufactures diamond-coated cutting tools, such as chisels and saws used by jewelers. Five Star Tools has three major processes involved in production of the stated tools. First, the steel tools that do not contain diamond coating are cut to size. Next tools are sent to a chemical bath station, to prepare for the coating and sharpening process. Finally, the tools are coated with diamond chips in a proprietary process that simultaneously coats and sharpens the bald of each tool. Following this three-step process, tools are then inspected, and at that time any defective units are repaired or disposed if beyond repair. During the past two years, the company has experienced tremendous growth, which has caused several growing pains for Five Star. Specifically the company has achieved capacity in the coating and sharpening process, because this particular operation requires highly skilled workers and expensive equipment. Consequently the company has missed deadlines on orders from several important customers due to the pain points (i.e. bottleneck) caused by the coating and sharpening. These serious operational issues have gotten the attention of the president, Maxfield Turner, and the vice president of marketing, Betty Spence. The two have discussed the alarming issues regarding the timing of production. Betty has expressed that the continuance of taking orders that will not be processed timely in the long run will taint the reputational value of Five Star Tools, and the community will view them as an unreliable supplier, which in turn will result in troubling times for the company. Given Betty's concerns, Maxfield has requested an analysis of product profitability from the accounting department. The head chief accounting officer as tasked me with the analysis. Issues How can Five Star Tools loosen constraints on production? What is the most profitable product line in light of the current production concerns? Analysis Either the constraint must be loosened or the firm needs to turn business beyond the scope of its current production capacity. More importantly prospective loss of market share and a decline of reputational value will likely have a negative impact on the firm's long-term profitability. The analysis of the production process will utilize Eli Goldratt's Theory of Constraint also referred to as TOC in evaluating feasibility. In order to boost Five Star Tool's overall performance, we must identify and eliminate the weakest link in the organization's production process. In this case, the production bottleneck has been identified as the coating and sharpening process. Next the company needs to optimize use of the constraint. Based on the data provided Model C210 appears to have a higher contribution margin per unit on the constraint. Accordingly, I would opine that until constraints in coating and sharpening are eliminated/contained, production should focus its resources on production of Model C210. Specifically Model C210 contributes $1250 per hour compared to Model D400's $537,50 per hour given the constraint in the coating and sharpening stage. Goldratt's Theory of Constraints operates on the premise that excess capacity from subordinate departments should be utilized to lessen the strain on the bottlenecked department. (Jiambalvo 2013). With that being said until the constraint on production is vanquished, management should subordinate everything else to the constraint. Certain actions should be undertaken by Five Star to loosen the constraints. I'd advise that management outsource inspection from the coating and sharpening department in order to free-up more valuable direct labor hours in the area of constraint. Additionally a separate inspection station prior to the final stage of production in the production process should be added in my opinion. Furthermore I would advise that an employee from the chemical bathing stage be cross-trained to inspect products as needed for the brief periods of inspection. Since the second process has been identified as the subordinate to the process undergoing the constraint, any of the excess capacity can otherwise be utilized in a more valuable capacity. For instance, each additional hour in the coating sharpening process will yield a firm benefit of $1250. Thus the addition of an inspection station will save 240 hours in the coating and sharpening department, which when multiplied by the $850 average contribution margin per hour in coating and sharpening results in a $204,000 incremental yearly profit for Five Star Tools. If order delays and constraints in this stage production continue, then management should consider increasing the batch size in the coating process and hiring additional workers whether full-time or part-time highly skilled workers. An immediate consideration would be to stagger breaks for departmental employees in order to allot for continuous work throughout the day. Calculations Used in Data Analysis Highest Contribution Margin Per Unit of Restraint Model C210 Model D400 Contribution Margin: $250 $430 Time in coat/sharp to produce 1 .2 hrs .8 hrs unit Total $1250/hr ($250 /. 2) $537.50/hr ($430 /. 8) Value of an Addition Labor Hour in Coating and Sharpening .2hrs = 1 unit of Model C210 1 hr= 5 units of Model C210 SP: $500 x 5 = $2500 Less VC: $250 x 5 = $1250 Contribution Margin = $1250/hr Incremental yearly profit associated with the new inspection station freed hours x average contribution margin per hour in coating and sharp 240 x $850 = $204,000 Conclusion Maxfield Turner should present his finding and suggestions on reducing the constraint in the coating and sharpening department at his meeting with Betty Spence next month. More importantly by adding an additional inspection point before the coating and sharpening department they will be able to loosen the constraint and free up an additional 240 hours of production time annually. In addition, the company needs to highlight sales of the Model C210 chisel because it has the greatest contribution margin. Betty Spence should advise her department to market this product more to its consumers