ACC 349 Week 3 Discussion Question 1
October 19, 2015 | By charlesmakaramdam4 |
For what is cost-volume-profit (CVP) analysis used? What are some of the key underlying assumptions that make CVP analysis useful for decision makers? Why might decision makers use CVP analysis?
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Ethics Case 21–7 - Ben Naegle - Where’s the cash? ● LO1 LO3 After graduating near the top of his class, Ben Naegle was hired by the local office of a Big 4 CPA firm in his hometown. Two years later, impressed with his technical skills and experience, Park Electronics, a large regional consumer electronics chain, hired Ben as assistant controller. This was last week. Now Ben’s initial excitement has turned to distress. The cause of Ben’s distress is the set of financial statements he’s stared at for the last four hours. For some time prior to his recruitment, he had been aware of the long trend of moderate profitability of his new employer. The reports on his desk confirm the slight, but steady, improvements in net income in recent years. The trend he was just now becoming aware of, though, was the decline in cash flows from operations. Ben had sketched out the following comparison ($ in millions): Profits? Yes. Increasing profits? Yes. The cause of his distress
Ethics Case 20–5 Softening the blow ● LO1 LO2 LO3 Late one Thursday afternoon, Joy Martin, a veteran audit manager with a regional CPA firm, was reviewing documents for a long-time client of the firm, AMT Transport. The year-end audit was scheduled to begin Monday. For three months, the economy had been in a down cycle and the transportation industry was particularly hard hit. As a result, Joy expected AMT’s financial results would not be pleasant news to shareholders. However, what Joy saw in the preliminary statements made her sigh aloud. Results were much worse than she feared. “Larry (the company president) already is in the doghouse with shareholders,” Joy thought to herself. “When they see these numbers, they’ll hang him out to dry.” “I wonder if he’s considered some strategic accounting changes,” she thought, after reflecting on the situation. “The bad news could be softened quite a bit by changing inventory methods from LIFO to FIFO or reconsidering some of the estimates used in other areas.” Required: 1. How would the actions contemplated contribute toward “softening” the bad news? 2. Do you perceive an ethical dilemma? What would be the likely impact of following up on Joy’s thoughts? Who would benefit? Who would be injured?
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