...2-1 Ethics Case: Brixton Surgical Devices Brixton Surgical Devices, a public company with sales of over $900,000,000, is one of the world’s largest productions of surgical clamps, saws, screws, and stents. Its business involves production of both stock items and customs pieces for doctors at research hospitals. At the end of the third quarter of 2011, it became clear to Ed Walters, chief operating officer, and Robin Smith , chief financial officer, that the company would not make the aggressive annual earnings target specified by the board of directors. In consequence, Ed and Robin would not receive bonuses, which historically had averaged about 35 percent of their base compensation. The two devised the following strategy. “Here’s what we’ll do,” suggested Ed. “We’ve never offered our customers a discount. Let’s change that right now. We’ll offer a 25 percent discount on all orders placed in October and November for delivery in December of 2011.” “That will certainly boost fourth-quarter sales,” said Robin. “But you know, it won’t really increase total sales. It’ll just transfer some sales from the first quarter of 2012 to the fourth quarter of 2011. Of course, 2011 is where we need earnings to hit our bonus target. Hey, I’ve got another idea. We can also jack up productions of our stock items in the fourth quarter. With our high-priced production equipment we’ve got a ton of overhead. But the more we produce the more overhead we can bury in inventory. With lower unit costs...
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...2-1 Ethics Case: Brixton Surgical Devices Brixton Surgical Devices, a public company with sales of over $900,000,000, is one of the world’s largest productions of surgical clamps, saws, screws, and stents. Its business involves production of both stock items and customs pieces for doctors at research hospitals. At the end of the third quarter of 2011, it became clear to Ed Walters, chief operating officer, and Robin Smith , chief financial officer, that the company would not make the aggressive annual earnings target specified by the board of directors. In consequence, Ed and Robin would not receive bonuses, which historically had averaged about 35 percent of their base compensation. The two devised the following strategy. “Here’s what we’ll do,” suggested Ed. “We’ve never offered our customers a discount. Let’s change that right now. We’ll offer a 25 percent discount on all orders placed in October and November for delivery in December of 2011.” “That will certainly boost fourth-quarter sales,” said Robin. “But you know, it won’t really increase total sales. It’ll just transfer some sales from the first quarter of 2012 to the fourth quarter of 2011. Of course, 2011 is where we need earnings to hit our bonus target. Hey, I’ve got another idea. We can also jack up productions of our stock items in the fourth quarter. With our high-priced production equipment we’ve got a ton of overhead. But the more we produce the more overhead we can bury in inventory. With lower unit costs...
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...Case 1-2 Boswell plumbing Products The cost information that the senior manager needs to make a decision depends on the decision she is trying to make. Therefore, if Nick ask “Why do you want to know?” he is just asking in another way “What decision are you trying to make?” If the senior manager want to dropp the product, Nick should give him information on the incremental costs that will be saved if the product is dropped. If she is thinking of increasing production, Nick should provide the incremental cost associated with such Decision. For example, if the product is dropped, the company could save the cost of buying production equipments, raw materials, and the cost of labor. None of these costs are pertaining to a decision to increase a production run by 100 units since none of these costs will change with the addition of 100 units to production. Case 2-1 Ethics case: Brixton Surgical Devices These decisions that Ed (the COO) and Robin (the CFO) are trying to make in order to assure there bonuses really does not violate Generally Accepted Accounting principles (GAAP), since the company has actual orders that shipped before the end of the year, this would need to be disclosed in the footnote in the annual report or shareholders will be misled and think there is an increase in revenue, and we all know that disclosure is likely to be intentionally obmitted. Increasing production to lower unit costs and bury fixed production costs in inventory, certainly takes money from...
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...Case Study 1-2 Boswell Plumbing products “Why would you want to know?” I believe that I would want to know for many reasons. First, as a senior manager or a member of the accounting office, this information is vital to the company’s success or potential downfall. Why keep dumping money into a product like D45s if it is not profitable? A lot of companies follow down the line of what ifs in hope that there may be a successful outcome in the end. It is like continuing to invest in penny stocks because someone else says it is the right time to invest. On the other hand, if the product like D45 is profitable why not increase the scheduled production. I believe with research and gathering trending facts, the best alternative will be selected. A very helpful tool in this decision making process is the incremental analysis. Incremental analysis is a key tool to aid throughout the process. It can be essential in identifying the best alternative or course of action when several avenues are available. This analysis tool is based on the differences between costs and revenues. In this situation when an alternative is to drop the product like D45s the most relevant cost information needed would be direct costs associated with the product itself. Then the change in income would be considered when coming to a final decision to remove D45 or to increase production. Case Study 2-1 Ethics Case: Brixton Surgical Devices No, Ed and Robin’s decision on boosting inventory and...
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...Copyright Salman Rushdie, 1988 All rights reserved VIKING Published by the Penguin Group Viking Penguin Inc., 40 West 23rd Street, New York, New York 10010, U.S.A. Penguin Books Ltd, 27 Wrights Lane, London W8 5TZ, England Penguin Books Australia Ltd. Ringwood, Victoria, Australia Penguin Books Canada Ltd, 2801 John Street, Markham, Ontario, Canada L3R 1B4 Penguin Books (N.Z.) Ltd, 182-190, Wairau Road, Auckland ro, New Zealand Penguin Books Ltd, Registered Offices: Harmondsworth, Middlesex, England Published in 1989 by Viking Penguin Inc. For Marianne Contents I The Angel Gibreel II Mahound III Ellowen Deeowen IV Ayesha V A City Visible but Unseen VI Return to Jahilia VII The Angel Azraeel VIII The Parting of the Arabian Seas IX A Wonderful Lamp Satan, being thus confined to a vagabond, wandering, unsettled condition, is without any certain abode; for though he has, in consequence of his angelic nature, a kind of empire in the liquid waste or air, yet this is certainly part of his punishment, that he is . . . without any fixed place, or space, allowed him to rest the sole of his foot upon. Daniel Defoe, _The History of the Devil_ I The Angel Gibreel "To be born again," sang Gibreel Farishta tumbling from the heavens, "first you have to die. Hoji! Hoji! To land upon the bosomy earth, first one needs to fly. Tat-taa! Taka-thun! How to ever smile again, if first you won't cry? How to win the darling's love, mister, without a sigh? Baba, if you want to get born again...
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