A requirement in Management Accounting Part I

Submitted By: Ms. Regine C. Consuelo

Submitted To: Ms. Corazon T. Villegas, CPA

 CASE ON PROFESSIONAL ETHICS

Franklin is the sales manager of Darius Enterprises, a very profitable distributor of office
furniture to local businesses. A recent economic downturn has created an extremely tight cash
position, and the company has been hurt by the bankruptcy of two key customers because of
this sudden event, Franklin began an extensive remodeling of the company sales floor costing
P250, 000 but Darius has a policy that individual expenditures in excess of P200, 000 must be
approved by the firm’s board of directors. Unfortunately, Franklin missed the deadline so he
subdivided the project in two parts which is construction and decorating, and equipment
purchases that cost P190, 000 and P60, 000 respectively. The project was recently completed
and sales have begun to recover. Discuss whether Franklin behaved in an ethical manner and
explain if any, of the following standards of conduct would have applicability to Franklin’s
conduct: competence, confidentiality, integrity, or credibility.

In my opinion, Franklin didn’t behaved in an ethical manner because he violate their

policy which is the individual expenditures in excess of P200, 000 must be approved by the
firm’s board of directors and he also violate the standards for ethical conduct which is
competence, integrity and objectivity. Even the result is good it does not suffice that Franklin
has violated the enterprise policy and it is not right thing to do because everyone maybe do it in
the future. There are some standards of conduct that Franklin contravene like competence,
integrity and objectivity to be able to conduct the project. Competence it is how should Franklin
perform his professional duties in accordance with relevant laws, regulations and technical
standards. Example of this is when he didn’t comply with their policy so he didn’t have
competence. Next, objectivity is disclosing fully all relevant information as of this standard he
didn’t inform the upper management about his project and he was just perform it without getting
some advice, opinion and approval to the BOD.

Therefore, Franklin should do the following in order to get an approval to the BOD
without having to violate the policy. First, he should schedule immediately an emergency
meeting when he missed the deadline to discuss his project and what its effect on their sales.
Second, he should give a letter/report to the top management about his project and why it is
important to discuss and implement immediately. Lastly, he should have learned in this
experience that when there is an important matter to do we should be early on his appointment
most importantly if it is about the financial matter.
 CASE ON ACTIVITY-BASED MANAGEMENT AND COST MANAGEMENT TOOLS

Just-in-time (JIT) technology can reduce the product cost because raw materials will be
delivered just in time for production. JIT technology under Philippine setting requires a little
adjustment because of the following reasons: traffic condition, truck ban, and flexibility.
Companies observing JIT technology must maintain a small warehouse for storage of raw
materials as a margin of safety whenever traffic problems arise at the time raw materials are
already needed in production. The following are costs that the companies save from incurrence
once JIT technology is observed: handling charges and expenses, retooling the employees for
performance efficiency and continuous technological innovations, and the like. Non-value-added
costs are the costs of activities that can be eliminated with no deterioration of product quality,
performance, or perceived value. These activities should be eliminated to save time and money.
General examples include the costs of inspection, moving, waiting, and storing. Non-value-
added activities are operations that are either (1) unnecessary and dispensable or (2)
necessary, but inefficient and improvable. These activities give rise to non-value-added costs,
which cut into company profitability. Non-value-added activities should be reduced and/or
eliminated through various process improvement techniques. Activities may also be shared in
some cases, with selected functions being combined and performed in a more efficient manner.

In order to perform the customer profitability analysis I need to compute the gross
margin and operating income on transactions related to its customers. Here is the pro-formula:
Sales revenue xxx
Cost of goods sold xxx
Gross margin xxx
Selling and administrative costs:
General selling costs xxx
General administrative costs xxx
Customer-related costs:
Sales visit xxx
Order taking xxx
Special handling xxx
Special shipping xxx
Total xxx
Operating income xxx

In order to compute the gross margin as a % of sales revenue is we need to divide the
gross margin to sales revenue. In order to get the cost of non-value-added activities we need
first to get the cost per activity (cost ÷ cost-driver quantity) and then find the inefficiencies
quantity to multiply to the cost per activity and then total it.

I conclude that Just-in-time inventory is best for the companies that want to reduce their
cost in production and minimize their materials on hand. It is not suitable for the areas that are
not easily to access to resources or needed materials in production but it is suitable for the
companies that want quick response to customer needs.
CASE ON
 CASE ON COST-VOLUME-PROFIT ANALYSIS

In this case, we will learn about break-even analysis which includes its break-
even point (in units) and break-even point (peso), contribution margin, safety
margin/margin of safety. Break-even point is the level where the company experienced
without profit and loss but in real world, the manager didn’t want this situation rather it
will be his basis on how much more control he should exercise to increase the profit. It
is also where the sales plus the variable cost is equal to the fixed cost.

I learned in this case is how to identify the effects of some transactions in the
company’s break-even point. If there’s a decrease in selling price, the