Managerial Accounting
15th Edition
ISBN: 9781337912020
Author: Carl Warren, Ph.d. Cma William B. Tayler
Publisher: South-Western College Pub
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Textbook Question
Chapter 8, Problem 1TIF
Ethics in Action
The director of marketing for Starr Computer Co., Megan Hewitt, had the following discussion with the company controller, Cam Morley, on July 26 of the current year:
Megan: Cam, it looks like I’m going to spend much less than indicated on my July budget.
Cam: I’m glad to hear it.
Megan: Well, I’m not so sure it’s good news. I’m concerned that the president will see that I’m under budget and reduce my budget in the future. The only reason that I look good is that we’ve delayed an advertising campaign. Once the campaign hits in September, I’m sure my actual expenditures will go up. You see, we are also having our sales convention in September. Having the advertising campaign and the convention at the same time is going to kill my September numbers.
Cam: I don’t think that’s anything to worry about. We all expect some variation in actual spending month to month. What’s really important is staying within the budgeted targets for the year. Does that look as if it’s going to be a problem?
Megan: I don’t think so, but just the same, I’d like to be on the safe side.
Cam: What do you mean?
Megan: Well, this is what I’d like to do. I want to pay the convention-related costs in advance this month. I’ll pay the hotel for room and convention space and purchase the airline tickets in advance. In this way, I can charge all these expenditures to July’s budget. This would cause my actual expenses to come close to budget for July. Moreover, when the big advertising campaign hits in September, I won’t have to worry about expenditures for the convention on my September budget as well. The convention costs will already be paid. Thus, my September expenses should be pretty close to budget.
Cam: I can’t tell you when to make your convention purchases, but I’m not too sure that September items should be expensed in July’s budget.
Megan: What’s the problem? It looks like “no harm, no foul” to me. I can’t see that there’s anything wrong with this—it’s just smart management.
How should Cam Morley respond to Megan Hewitt’s request to expense the advanced payments for convention-related costs against July’s budget?
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Ethics in ActionThe director of marketing for Starr Computer Co., Megan Hewitt, hadthe following discussion with the company controller. Cam Morley, onJuly 26 of the current year:
Megan: Cam, it looks like I'm going to spend much less than indicated onmy July budget.Cam: I'm glad to hear it.
Megan: Well. I'm not so sure it's good news. I'm concerned that thepresident will see that I'm under budget and reduce my budget in thefuture. The only reason I look good is because we delayed an advertising
campaign. Once the campaign hits in September, I'm sure my actualexpenditures will go up. You see, we are also having our sales conventionin September. Having the advertising campaign and the convention atthe same time is going to kill my September numbers.
Cam: I don't think that's anything to worry about. We all expect somevariation in actual spending month to month. What's really important isstaying within the budgeted targets for the year. Does that look as if it'sgoing to be a problem?…
Is ABC Manufacturing is properly using the budget process to plan for next year's expenses?
You have just been hired at ABC Manufacturing, and your supervisor has invited you to sit in on today's budget meeting. You are given a copy of
the following proposed budget for next year to review. The budget is being used by ABC to plan for next year. Your supervisor tells you right before
the meeting, "We always overestimate because the president always makes us cut the budget by 20%, and besides, I really want to go to that
conference in Las Vegas next year." He continued," I have really worked hard this year and put in a lot of overtime so I deserve it."
ABC MANUFACTURING
Budgeted Income Statement // For the Year Ended Dec. 31, 20XX
REVENUE: Sales
COST OF GOODS SOLD: Cost of Goods Sold
GROSS PROFIT
EXPENSES:
Advertising
Cleaning
Insurance
Phone
Rent
Supplies
Taxes
Training/Education
Utilities
Wages
Total Expenses
NET INCOME
9,500
1,800
28,000
3,600
24,000
6,500
10,000
9,800
8,500
150,000…
Jane and Alex both work at Spartans Inc. Jane, the manger of a production department, buys lunch for
Alex, who works in Accounting. Alex is preparing the monthly projections for the various production
departments. At lunch, Jane asks Alex "to be conservative in his estimates" of variable costs in crafting
the budget.
Which, if any, ethical standards did Jane violate?
O Credibility - failure to provide all relevant information that could influence a decision.
O Competence - failure to maintain an appropriate level of expertise.
O Integrity - failure to abstain from activities that might discredit the profession.
Confidentiality - failure to refrain from using information for an unethical advantage.
O Integrity - failure to mitigate conflicts of interest.
O Confidentiality - disclosure of confidential information without authorization or legal requirement.
Chapter 8 Solutions
Managerial Accounting
Ch. 8 - Prob. 1DQCh. 8 - Briefly describe the type of human behavior...Ch. 8 - What behavioral problems are associated with...Ch. 8 - What behavioral problems are associated with...Ch. 8 - Under what circumstances would a static budget be...Ch. 8 - Prob. 6DQCh. 8 - Prob. 7DQCh. 8 - Why should the timing of direct materials...Ch. 8 - Prob. 9DQCh. 8 - Give an example of how the capital expenditures...
Ch. 8 - At the beginning of the period, the Fabricating...Ch. 8 - Pasadena Candle Inc. projected sales of 800,000...Ch. 8 - Pasadena Candle Inc. budgeted production of...Ch. 8 - Pasadena Candle Inc. budgeted production of...Ch. 8 - Prob. 5BECh. 8 - Cash budget Pasadena Candle Inc. pays 40% of its...Ch. 8 - At the beginning of the school year, Craig Kovar...Ch. 8 - Digital Solutions Inc. uses flexible budgets that...Ch. 8 - Static budget versus flexible budget The...Ch. 8 - Prob. 4ECh. 8 - Production budget Healthy Measures Inc. produces a...Ch. 8 - Sales and production budgets Sonic Inc....Ch. 8 - Professional foes earned budget for a service...Ch. 8 - Prob. 8ECh. 8 - Prob. 9ECh. 8 - Prob. 10ECh. 8 - Prob. 11ECh. 8 - Direct labor cost budget Ace Racket Company...Ch. 8 - Prob. 13ECh. 8 - Factory overhead cost budget Sweet Tooth Candy...Ch. 8 - Cost of goods sold budget Delaware Chemical...Ch. 8 - Prob. 16ECh. 8 - Prob. 17ECh. 8 - Prob. 18ECh. 8 - Schedule of cash payments for service company...Ch. 8 - Prob. 20ECh. 8 - Capital expenditures budget On January 1, 20Y6,...Ch. 8 - Prob. 1PACh. 8 - Sales, production, direct materials purchases, and...Ch. 8 - Budgeted income statement and supporting budgets...Ch. 8 - Budgeted income statement and supporting budgets...Ch. 8 - Cash budget The controller of Bridgeport...Ch. 8 - Budgeted income statement and balance sheet As a...Ch. 8 - Prob. 1PBCh. 8 - Sales, production, direct materials purchases, and...Ch. 8 - Budgeted income statement and supporting budgets...Ch. 8 - Prob. 4PBCh. 8 - Cash budget The controller of Mercury Shoes Inc....Ch. 8 - Budgeted income statement and balance sheet As a...Ch. 8 - Analyze Johnson Stores staffing budget for...Ch. 8 - Prob. 2MADCh. 8 - Prob. 3MADCh. 8 - Prob. 4MADCh. 8 - Ethics in Action The director of marketing for...Ch. 8 - Prob. 3TIFCh. 8 - Evaluating the budgeting system in a service...Ch. 8 - Static budget for a service company A hank manager...Ch. 8 - Objectives of the master budget Dominos Pizza LLC...Ch. 8 - When compared to static budgets, flexible budgets:...Ch. 8 - Prob. 2CMACh. 8 - Ming Company has budgeted sales at 6,300 units for...Ch. 8 - Krouse Company produces two products, forged...
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