What three guidelines help management accountants provide the most value to managers?
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Professional ethics and reporting division performance. Hannah Gilpin is the controller of Blakemore Auto Glass, a division of Eastern Glass and Window. Blakemore replaces and installs windshields. Her division has been under pressure to improve its divisional operating income. Currently. divisions of Eastern Glass are allocated corporate overhead based on cost of goods sold. Jake Myers, the president of the division, has asked Gilpin to reclassify $\$ 50,000$ of installation labor, which is included in cost of goods sold, as administrative labor, which is not. Doing so will save the division $\$ 20,000$ in allocated corporate overhead. The labor costs in question involve installation labor provided by trainee employees. Myers argues, "the trainees are not as efficient as regular employees so this is unfairly inflating our cost of goods sold. This is really a cost of training (administrative labor) not part of cost of goods sold." Gilpin does not see a reason for reclassification of the costs, other than to avoid overhead allocation costs. 1\. Describe Gilpin's ethical dilemma. 2\. What should Gilpin do if Myers gives her a direct order to reclassify the costs?
How can management accountants help improve quality and achieve timely product deliveries?
How does management accounting differ from financial accounting?
For each of the following items, identify which of the manage- ment accounting guidelines applies: cost–benefit approach, behavioral and technical considerations, or different costs for different purposes. 1\. Analyzing whether to keep the billing function within an organization or outsource it 2\. Deciding to give bonuses for superior performance to the employees in a Japanese subsidiary and extra vacation time to the employees in a Swedish subsidiary. 3\. Including costs of all the value-chain functions before deciding to launch a new product, but including only its manufacturing costs in determining its inventory valuation. 4\. Considering the desirability of hiring an additional salesperson. 5\. Giving each salesperson the compensation option of choosing either a low salary and a high-percentage sales commission or a high salary and a low- percentage sales commission. 6\. Selecting the costlier computer system after considering two systems. 7\. Installing a participatory budgeting system in which managers set their own performance targets, instead of top management imposing performance targets on managers. 8\. Recording research costs as an expense for financial reporting purposes (as required by U.S. GAAP) but capitalizing and expensing them over a longer period for management performance-evaluation purposes. 9\. Introducing a profit-sharing plan for employees.
Dominion Consulting has issued a report recommending changes for its newest manufacturing client, Gibson Engine Works. Gibson currently manufactures a single product, which is sold and distributed nationally. The report contains the following suggestions for enhancing business performance: a. Develop a rechargeable electric engine to stay ahead of competitors. b. Adopt a TQM philosophy to reduce waste and defects to near zero. c. Reduce lead times (time from customer order of product to customer receipt of product) by \(20 \%\) in order to increase customer retention. d. Negotiate faster response times with direct material suppliers to allow for lower material inventory levels. e. Benchmark the company's gross margin percentages against its major competitors.
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