Company X produces a molded hard plastic covers for I - pads. Summary data from its 2
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Question:
Company X produces a molded hard plastic covers for Ipads. Summary data from its income statement are as follows:
Revenues: $
Variable costs: $
Fixed costs: $
Operating income: $
The Company X president, Jane Harvey, is very concerned about the firms poor profitability. She asks Joe Smith, the Production Manager managerial accounting to see if there are any ways in which they can reduce costs.
A few weeks later, Joe returns with a proposal to reduce variable costs to of revenues by reducing the costs that the company currently incurs for safe disposal of wasted plastic.
The Controller Financial Accounting is concerned that this would expose the company to potential environmental liabilities. He tells Joe that he thinks that the company would need to estimate some of the potential environmental costs and include them in the breakeven analysis. Joe Smith disagrees. He feels that the company will not be violating any laws and that there is only a possibility of environmental costs in the future.
In your original post, you must address all of the following:
Calculate the breakeven revenues for using the information given above.
Recalculate the breakeven revenues if variable costs are of revenues.
Calculate the company's operating income for if variable costs had been of revenues.
Answer the following questions
What are the ethical issues involved in this case? Explain your answer.
How do these issues relate to rulesbased standardsetting and principlesbased standard setting?
Do you feel that the Production Manager is acting improperly, unethically, or immorally? Why or why not? Please explain your response.
What stakeholders would be affected if the Controller implemented the Production Manager's suggestions? Why?
Related Book For
Cost Accounting A Managerial Emphasis
ISBN: 978-0136126638
13th Edition
Authors: Charles T. Horngren, Srikant M.Dater, George Foster, Madhav
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