Cost Accounting Memo Assignment Letter
To: Mr. Ray
From: Linda Butler
Its noted that Mihaylo Foods is expecting a reduced annual earnings growth of 8% an aspect that Ronald Ray, the snack foods division president is not happy with as he notes some of the listed end-of-year actions by the previous controller that are less acceptable even though Ray notes that actions need to be taken. Linda Butler who is new division controller compiled a list of end-year strategies that the precious controller had compiled. The previous controller had played end of the year games since he was not able perform and meet the targets that have been consistent with the previous records of the business.
For the end of year reporting, according to the new snack food controller, the expected earnings are way less compared to the earnings of the last 3 years. Previous controller knew that his performance will be scrutinized when the management realized the division had not performed. It’s also noted that the snack food division was the most critical department that has consistently shown growth and if its earnings declined, the earnings of the whole company will be affected.
Some of the possible actions to be implemented at the end of year strategies would be possible employee motivations in the snack food division as indicated below. This would ensure that the staff work extra harder as they are motivated to double their efforts.
A bonus scheme would have been developed for Mihaylo Foods that will be based on one-year reported division earnings. Additionally, if the bonus can be increased if the efforts to front-end the revenue to the current year as well as transferring costs to the next year are factored in.
Promotion opportunities and job security.
The top management in Mihaylo Foods will evaluate the performance of the division managers through comparison of their reported earnings as well as the growth rates as key prospects for promotion. Those division managers who doesn’t meet the set targets are less likely to be promoted and their jobs are at risk as well.
Retain Division Autonomy
For the divisions that have been reporting huge drops in their earnings growth rates, may face some considerable increase in supervision if the top management would consider using the ‘management by exception approach’.
B: Violation of Ethical Standards and Reason Why?
Deferring December's routine maintenance on packing equipment by an independent contractor until January of next year.
This action is acceptable under a normal accounting practice. Even though the costs that were incurred in December, the business tends to get returns the following year, that indicates the costs should be booked in the next year under normal accounting practices.
Extending the close of the current fiscal year beyond December 31 so that some sales of next year are included in the current year.
This is unacceptable under a normal accounting practice as it’s against the integrity standards since there is provision of wrong financial information. Further the …