Question 2-22

Chapter ? Cost Terms. Concepts, and Classifications 55 Inventory balances at the beginning and end of June were as follows! June 1 June 30 Raw materials ... . .. .. Work in process. $19,060 Finished goods . 77,090 22.000 66,D00 G. Some 90' of the insurance and 80% of the utilities cost apply to factory operations; the remaining amounts apply to selling and administrative activities. The president has asked you to check over the above income statement and recommend whether the company should continue operations Required: 1. As one step in gathering data for a recommendation to the president. prepare a schedule of cost of goods manufactured for June. 2. 3. As a second step. prepare a new income statement for the month Based on your statements prepared in (1) and (2) above, would you recommend that the company continue operations? PROBLEM 2-23 Ethics and the Manager [102] The top management of General Electronics Inc. is well known for "managing by the numbers." With an eye on the company's desired growth in overall net profit, the company's CEO sets target profits at the beginning of the year for each of the company's divisions, The CEO has stated her policy as follows: "I won't interfere with operations in the divisions. I am available for advice, but the division vice- presidents are free to do anything they want as long as they hit the target profits for the year." In November, Stan Richart, the vice-president in charge of the Smartphone Technologies Division. saw that making the current year's target profit for his division was going to be very difficult. Among other actions, he directed that discretionary expenditures be delayed until the beginning of the new year. On December 30, he was angered to discover that a warehouse clerk had ordered $350,000 of smart- phone parts earlier in December, even though the parts weren't really needed by the assembly depart- ment until January or February, Contrary to common accounting practice, the General Electronics Inc. Accounting Policy Manual states that such parts are to be recorded as an expense when delivered. To avoid recording the expense, Richart asked that the order be cancelled, but the Purchasing Department reported that the parts had already been delivered and the supplier would not accept returns, Since the bill had not yet been paid, Richart asked the Accounting Department to correct the clerk's mistake by delaying recognition of the delivery until the bill is paid in January. Required: Are Richart's actions ethical? Explain why they are or are not ethical. 2. Do the general management philosophy and accounting policies at General Electronics encourage or discourage ethical behaviour? Explain. PROBLEM 2-24 Schedule of Cost of Goods Manufactured; Income Statement; Cost Behaviour (LOI, LO2, 103, LO4, LOS] Carlton Manufacturing Company provided the following details about operations in February: Purchases of raw materials . ....... $130,000 Maintenance, factory........ .. . .. . 37,000 Direct labour ... .. . .. . . . . . 32.500 Depreciation, factory equipment. ........ .. $5.000 Indirect materials, factory ......... ..... 3,000 Selling and administrative salaries 42.500 Utilities, factory... 26,000 Sales commissions.. 17.500 factory equipment . . 4.000 20.000The story of de porttown The Seat when of the berger .pyle de war and deliver its iteads to the Moshoe Whel program whether it is a direct is indingices of particular semis werveil by the program, and weedegg saybade is fiord with reyred mike a nices served Dve the Form belows for your answer Variable or Fixed Direct or Indirect with Respect to Direct or Indirect Cost of Particular the Number of Cost of the Seniors Served Iny Seniors Served by Meals-on the Meals-on- the Meals-on- Wheels Program Wheels Program Wheels Program Item Description Direct Indirect Direct Indirect Variable Fixed Example The went of groceries used in meat X PRO prepanition The eye PROBLEM 3-22 Schedule of Cost of Goods Manufactured: Income Statement Weekay Company was organized on November I of the previous year. After seven months of start up losses pre management had expectoil to earn a profit during June, the most recent moni, Management was disap pointed, however, when the income statement for June also showed a loss. June's income statement follow VEEKAY COMPANY Income Statement For the Month Ended June 30 $660,000 Less operating expenses: Selling and administrative salaries . .. $ 39.000 Rent on facilities.... 40,000 Purchases of raw materials . 209,000 Insurance... 10.000 Depreciation, sales equipment ... 11,000 Utilities costs, . 55.000 Indirect labour..... 119.090 Direct labour .... 99,000 Depreciation, factory equipment... 13,000 Maintenance, factory..... 8.090 Advertising.. 88.000 691.000 Operating loss .. $(31,000) After seeing the $31.000 loss for June. Veekay's president stated. "I was sure we'd be profitable within six months, but after eight months we're still spilling red ink. Maybe it's time for us to throw in the towel. To make matters worse, I just heard that Debbie won't be back from her surgery for at least six more weeks." Debbie is the company's controller: in her absence, the statement above was prepared by a new as- company follows: sistant who has had little experience in manufacturing operations. Additional information about the a . Only 85% of the rent on facilities applies to factory operations; the remainder applies to selling and administrative activities