Coss Marte is a former prison inmate who lost 70 pounds during six months of incarceration. He accomplished this remarkable transformation without any gym equipment or a personal trainer—just the walls and floor in his 9’ by 6’ prison cell. After his release, Marte started a company called CONBODY that provides military-style bodyweight training for its customers. The company offers more than 50 online, on-demand exercise classes as well as live virtual workout opportunities.

Applying Managerial Accounting In managing his company, Marte has numerous opportunities to apply managerial accounting cost concepts. For example, when preparing a budget, he’d need to distinguish between variable costs (such as instructor labor costs that vary with respect to the number of classes taught) and fixed costs (such as his monthly website maintenance costs). He’d also need to separate relevant costs from irrelevant costs when deciding whether to add a new class or discontinue an existing class.

Serving All Stakeholders CONBODY’s mission “is to bridge a gap between two communities: young professionals and formerly incarcerated individuals.” The company also partners with nonprofit organizations to provide former inmates with educational resources, mentorship, housing, and employment opportunities. To date, Marte has hired over 40 former inmates as fitness instructors with an astonishing zero percent recidivism rate.

Costs are unique and may be customizable to the organization or industry such as described above. Managerial accounting is concerned with providing information to managers within the organization about costs. Managers expect to know what is included in direct materials, direct labor, and manufacturing overhead. They also expect to know what constitutes product costs and variable costs. The costs of production are substantial, and it is incumbent on managers to understand what constitutes their costs.

After reading the Coss Marte Company (entrepreneur spotlight case), answer the following questions in your initial posting:

1. Is CONBODY exempt from reporting wages of incarcerated employees to the IRS because of the mission of the company?

2. Does CONBODY’s decisions comply with IMA’s Statement of Ethical Professional Practice? Why?

3. Explain the differences between managerial accounting and financial accounting. Are generally accepted accounting principles (GAAP) required at Coss Marte’s company?