Ethics in Action
Danielle Hastings was recently hired as a cost analyst by CareNet Medical Supplies Inc. One of Danielle’s first assignments was to perform a
Jerrod: Danielle, you’re new here, aren’t you?
Danielle: Yes, I am.
Jerrod: Well, Danielle, I’m not at all pleased with the capital investment analysis that you performed on this new warehouse. I need that warehouse for my production. If I don’t get it, where am I going to place our output?
Danielle: Well, we need to get product into our customers’ hands.
Jerrod: I agree, and we need a warehouse to do that.
Danielle: My analysis does not support constructing a new warehouse. The numbers don’t lie; the warehouse does not meet our investment return targets. In fact, it seems to me that purchasing a warehouse does not add much value to the business. We need to be producing product to satisfy customer orders, not to fill a warehouse.
Jerrod: The headquarters people will not allow me to build the warehouse if the numbers don’t add up. You know as well as I that many assumptions go into your net present value analysis. Why don’t you relax some of your assumptions so that the financial savings will offset the cost?
Danielle: I’m willing to discuss my assumptions with you. Maybe I overlooked something.
Jerrod: Good. Here’s what I want you to do. I see in your analysis that you don’t project greater sales as a result of the warehouse. It seems to me that if we can store more goods, then we will have more to sell. Thus, logically, a larger warehouse translates into more sales. If you incorporate this into your analysis, I think you’ll see that the numbers will work out. Why don’t you work it through and come back with a new analysis. I’m really counting on you on this one. Let’s get off to a good start together and see if we can get this project accepted.
What is your advice to Danielle?
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Managerial Accounting
- Ethics and professional conduct in business Erin Haywood was recently hired as a cost analyst by Wind River Medical Supplies Inc. Oneof Erin’s first assignments was to perform a net present value analysis for a new warehouse.Et-in performed the analysis and calculated a present value index of 0.8. The plant manager.ZuhairBarbat, is very intent on purchasing the warehouse because he believes that more storage space is needed. Zuhair asks Erín into his office and the following conversation takes place: ZubairErín, you’re new here, aren’t you? EHii: Yes, sir. Zubair: V.dl, Erin, let me tell you something. ¡m not at all pleased with the capital investment analysis that you performed on this new warehouse. T need that warehouse for my production. If I dont get it, where am I going to place our output? Erín: Hopefully with the customer, sir. Zithair: Now don’t get smart with me. Erín: No, really. I was being serious. My analysis does not support constructing a new ware- house. The numbers don’t lie: the warehouse does not meet our investment return targets. In fact, it seems to me that purchasing a warehouse dots not add much value to the business. We need to be producing product to satisfy customer orders, not to fill a warehouse. Zubair Listen, you need to understand sonwthing. The headquarters people will not allow mv to build the warehouse if the numbers dont add up. You know as well as I that many assump tions go into your net present value analysis. Why don’t you relax some of your assumptions so that the f́nancial savings will offset the cost? Erín: I’m willing to discuss my assumptions with you. Maybe I overlooked something. Zubafr Good. Here’s what I want you to do. 1 see in your analysis tha you don’t project greater sales as a result of the warehouse. It seems to me, if we can store more goxLs, then will have more to sell. Thus, logically, a larger warehouse translates into more sales. If you incorporate this into your analysis, I think you’ll see that the numbers will work out. Why don’t you work it through and come back with a new analysis? I’m really counting on you on this one. Let’s get off to a good start together and see if we can get this project accepted. What is your advice to Erin?arrow_forwardAssume you are the manager for the semi-trucks division at the Speedy Delivery Company. The semi-truck division is a cost center and you are reviewing the driver overtime costs for the previous year, shown here: A. Microsoft Excel or another spreadsheet application, create a line chart with markers showing the driver overtime expense. Describe your observations. B. Knowing that safety is important in your industry and weather plays a significant role in the safety of drivers, you decide to talk with the safety manager and obtained the following information: Using Microsoft Excel or another spreadsheet application, create individual line charts with markers showing the average snowfall and non-company highway accidents. Describe your observations and actions you might consider.arrow_forwardMary Martell is a finance intern at a big corporation that was given the task to evaluate the profitability of a new, state of the art production line. She found that the project has a negative NPV. This is bad news for Sarah Pearl, who is the head of the manufacturing department and the proponent of the project. Mary delivered the news to her boss, Winston Rodriguez, who called Sarah and gave her the news: “Hello Sarah this is Winston from the finance department. The new inter confirmed what we all knew in the department: the net present value of your proposal is negative and therefore we need to reject the project. To be honest, we already had reached that conclusion but we wanted an outside opinion and gave Mary the task of evaluating the project. Sorry, but the project is a no.”Sarah later sent an email to Winston: “Winston, please, don’t kill my project.” She then asked the following questions: “Why is the NPV so important? Why don’t we use the average accounting rate of return…arrow_forward
- Penny is compiling a list of costs incurred so far on a project. She must categorize these costs so that she can present the amount of direct cost incurred. Which of the following should Penny include in this list?This type of question contains radio buttons and checkboxes for selection of options. Use Tab for navigation and Enter or space to select the option. option A Expense incurred in meeting the regulatory standards for the company option B Benefits for employees in the organization option C Travel expenses to the customer’s office option D Costs incurred for maintaining coffee stations around the office.arrow_forwardSally works as a manager in the gardening section of her local Bunnings Store. Recently, Sally was approached by a customer asking questions about the store's range of built-in kitchens. Although she knew nothing about the products, Sally recommended the deluxe kitchen package which came with free installation. After completing the sale, Sally handed the customer her Bunnings business card (which identified her as a manager), explained that the customer should get his new kitchen professionally installed and to forward her the 3 party's invoice- which Bunnings would pay. A few weeks later, the customer is shocked to learn that Bunnings is refusing to pay his carpenter's $10,000 invoice and that Sally failed to mention that the offer was capped at $500. Required: a) With reference to Pacific Cariers v Paribas, what is the test for deciding if an agent had apparent authority? b) Analyse whether Sally had apparent authority to bind Bunnings Pty Ltd to this $10,000 contract. C) How would…arrow_forwardQuestion 3 Please provide a very detail answer for the below question:- Asma is a junior management accountant at Flower Cloth Ltd. Asma is given the task of compiling a cost-benefit analysis report on whether the company should purchase an expensive new machine from Radi Ltd, where her brother is the new sales manager. Asma did not tell anyone in Flower Cloth about her brother’s new job. In preparing her report, Asma overstates the qualitative benefits and understates the costs associated with this new machine to help her brother make his first sales as the new sales manager. Required: Discuss why and how Asma has deviated from the standards of ethical conduct.arrow_forward
- Penny Davis runs the Shear Beauty Salon near a college campus. Several months ago, Penny used some unused space at the back of the salon and bought two used tanning beds. She hired a receptionist and kept the salon open for extended hours each week so that tanning clients would be able to use the benefits of their tanning packages. After three months, Penny wanted additional information on the costs of the tanning area. She accumulated the following data on four accounts: Penny decided that wages and equipment depreciation were fixed. She thought supplies and maintenance would vary with the number of tanning visits and that electricity would vary with the number of tanning minutes. Required: 1. Calculate the average account balance for each account. Calculate the average monthly amount for each of the two drivers. (Round all answers to the nearest dollar or the nearest whole unit.) 2. Calculate fixed monthly cost and the variable rates for the account averages. (Round to the nearest cent.) Express the results in the form of an equation for total cost. 3. In April, Penny predicts there will be 360 visits for a total of 3,700 minutes. What is the total cost for April? 4. Suppose that Penny decides to buy a new tanning bed at the beginning of April for 6,960. The tanning bed is expected to last four years and will have no salvage value at the end of that time. What part of the cost equation will be affected? How? What is the new expected cost in April?arrow_forwardSara has just taken a job as the middle school assistant principal for an area school district. Prior to Chis, she was a teacher. She has received the following performance measurements for her first administrative job. Her first order of business is to determine if these performance measurements are short-term goals or long-term goals based on her individual situation. She has completed her administrative degree but has not yet worked as an administrator. Identify each of the following goals as short term or long term. A. Conduct teacher walk-throughs/observations/evaluations for teachers of grades 6 and 7. B. Assist the districts mission in seeking to educate all youth in the school district. C. Train to become a building instructional leader. Act as building administrator in the absence of the principal. D. Attend meetings with building principals and the administrative team when called to do so. E. Engage all students in a meaningful way, and support teachers and staff in providing rigor and relevance. Success of school-wide discipline and attendance policies and enforcement depends on a combination of creativity and sound pedagogy while adhering to district, state, and federal law, guidelines, and regulations. F. Facilitate and supervise all federal- and state-mandated drills (fire, lockdowns, tornado, others). G. Dress professionally. H. Assist the building principal in all job duties and responsibilities.arrow_forwardLisa is a contractor, and she owns a small home renovation company that specializes in kitchen renovations. Lisa fears she has been underbidding her projects, and that translates into lost profits that could help sustain her through slow periods. She is putting together an estimate for a potential client and has determined the following activities: Activity Cost Driver Rate Estimated Use for Job Demo of Existing Space Square Footage $3.26 /square foot 520 square feet Cabinet Installation # of Hours $205 /hour 8 hours Countertop Installation Square Footage $12.00/square foot 280 square feet Previously, Lisa was billing at a flat rate of $16 per square foot of the demo space with no additional markup. Lisa would like to add a 20% markup to the cost to arrive at the final bid price. Using Activity-Based Costing (ABC), what is the final bid price for her potential customer? (Round intermediate calculations and final answer to 2 decimal places, eg. 25,000.25.) Final bid price $arrow_forward
- Hello, may you please help me with the following.. Mary Martell is a finance intern at a big corporation that was given the task to evaluate the profitability of a new, state of the art production line. She found that the project has a negative NPV. This is bad news for Sarah Pearl, who is the head of the manufacturing department and the proponent of the project. Mary delivered the news to her boss, Winston Rodriguez, who called Sarah and gave her the news: “Hello Sarah this is Winston from the finance department. The new inter confirmed what we all knew in the department: the net present value of your proposal is negative and therefore we need to reject the project. To be honest, we already had reached that conclusion but we wanted an outside opinion and gave Mary the task of evaluating the project. Sorry, but the project is a no.” Sarah later sent an email to Winston: “Winston, please, don’t kill my project.” She then asked the following questions: “Why is the NPV so important?…arrow_forwardSuppose that you have been given a summer job as an intern at Issac Aircams, a company that manufacturessophisticated spy cameras for remote-controlled military reconnaissance aircraft. The company, which isprivately owned, has approached a bank for a loan to help it finance its growth. The bank requires financialstatements before approving such a loan. You have been asked to help prepare the financial statements andwere given the following list of costs:1. Depreciation on salespersons’ cars.2. Rent on equipment used in the factory.3. Lubricants used for machine maintenance.4. Salaries of personnel who work in the finished goods warehouse.5. Soap and paper towels used by factory workers at the end of a shift.6. Factory supervisors’ salaries.7. Heat, water, and power consumed in the factory.8. Materials used for boxing products for shipment overseas. (Units are not normally boxed.)9. Advertising costs.10. Workers’ compensation insurance for factory employees.11. Depreciation on chairs…arrow_forwardSuppose that you have been given a summer job as an intern at Issac Aircams, a company that man- ufactures sophisticated spy cameras for remote-controlled military reconnaissance aircraft. The company, which is privately owned, has approached a bank for a loan to help it finance its growth. The bank requires financial statements before approving such a loan. You have been asked to help prepare the financial statements and were given the following list of costs: Depreciation on salespersons’ cars. Rent on equipment used in the factory. Lubricants used for machine maintenance. Salaries of personnel who work in the finished goods warehouse. Soap and paper towels used by factory workers at the end of a shift. Factory supervisors’ salaries. Heat, water, and power consumed in the factory. Materials used for boxing products for shipment overseas. (Units are not normally boxed.) Advertising costs. Workers’ compensation insurance for factory employees. Depreciation on…arrow_forward
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