Jason Howitz, the new plant manager of Old Wine Manufacturing Plant Number 7, has just reviewed...

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Jason Howitz, the new plant manager of Old Wine Manufacturing Plant Number 7, has just reviewed a draft of his year-end financial statements. Howitz receives a year-end bonus of 6.5% 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, Howitz demanded th controller go back and "work the numbers" again. Howitz 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. Requirement 1. Show numerically how operating income would improve by $900,000 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 = More info Old Wine Manufacturing classifies all costs directly related to the manufacturing of its product as product costs. These costs are inventoried and later expensed as costs of goods sold when the product is sold. All other expenses, including finished goods warehousing costs of $4,200,000, are classified as period expenses. Howitz had suggested that warehousing costs be included as product costs because they are "definitely related to our product." The company produced 280,000 units during the period and sold 220,000 units. As the controller reworked the numbers he discovered that if he included warehousing costs as product costs, he could improve operating income by $900,000. He was also sure these new numbers would make Howitz happy. Requirements 1. Show numerically how operating income would improve by $900,000 just by classifying the preceding costs as product costs instead of period expenses. 2. Is Howitz correct in his justification that these costs "are definitely related to our product"? 3. By how much will Howitz profit personally if the controller makes the adjustments in requirement 1? 4. What should the plant controller do? Jason Howitz, the new plant manager of Old Wine Manufacturing Plant Number 7, has just reviewed a draft of his year-end financial statements. Howitz receives a year-end bonus of 6.5% 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, Howitz demanded th controller go back and "work the numbers" again. Howitz 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. Requirement 1. Show numerically how operating income would improve by $900,000 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 = More info Old Wine Manufacturing classifies all costs directly related to the manufacturing of its product as product costs. These costs are inventoried and later expensed as costs of goods sold when the product is sold. All other expenses, including finished goods warehousing costs of $4,200,000, are classified as period expenses. Howitz had suggested that warehousing costs be included as product costs because they are "definitely related to our product." The company produced 280,000 units during the period and sold 220,000 units. As the controller reworked the numbers he discovered that if he included warehousing costs as product costs, he could improve operating income by $900,000. He was also sure these new numbers would make Howitz happy. Requirements 1. Show numerically how operating income would improve by $900,000 just by classifying the preceding costs as product costs instead of period expenses. 2. Is Howitz correct in his justification that these costs "are definitely related to our product"? 3. By how much will Howitz profit personally if the controller makes the adjustments in requirement 1? 4. What should the plant controller do?