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Jason Howell, the new plant manager of Old Tree Manufacturing Plant Number 7, has just reviewed a draft of his year-end financial statements. Howell
Jason Howell, the new plant manager of Old Tree Manufacturing Plant Number 7, has just reviewed a draft of his year-end financial statements. Howell receives a year-end bonus of 9% of the plant's operating income before tax. The year-end income statement provided by the plant's controller was disappointing to say the least. After reviewing the numbers, Howell demanded that his controller go back and "work the numbers" again. Howell insisted that if he didn't see a better operating income number the next time around he would be forced to look for a new controller Click the icon to view additional data) Read the requirements CRO Requirement 1. Show numerically how operating income would improve by $170,000 just by classifying the preceding costs as product costs instead of period expenses Begin by determining the formula to compute how the controller was able to improve operating income, then enter the appropriate amounts and compute the increase in operating income. Increase in operating income Requirement 2. Is Howell correct in his justification that these costs are definitely related to our product? The controller reclassify costs as correct in his justification with respect to classifying costs as product or period costs; this determination is made by development, as well as all costs related to warehousing and distribution of goods, should be classified as Requirement 3. By how much will Howell profit personally if the controller makes the adjustments in requirement 17 Jason Howell will profit personally by the controller makes the adjustments Requirement 4. What should the plant controller do? The controller Research and and be costs that are directly related to manufacturing and to properly reflect on the so the plant manager can reap short-term benefits. The idea of corectly classifying costs is to propeny reflect on the those costs that will provide a future benef Yose
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