During week four you studied process costing and saw how this cost accounting system varied from job order costing that you learned about in week three. For your week four discussion board post I would like you do identify a publicly traded manufacturing company. BY publicly traded it means they have stock traded on an exchange such as the New York Stock Exchange. I would then like you to research a product they manufacture. Based on what you have found would they use process costing or job order costing. Why did you select the method they did. Please be sure to integrate terms and concepts you learned about in week three and four as you describe the cost accounting system they might use.
Please go to this link and read more about process costing.
Running Head: Ethical Issues 1
Ethical Issues 3
Ethical issues: Under application of Manufacturing Overhead
The first alternative involves Jackson doing nothing regarding the issue. This course of action is not appropriate. Why? As an accountant, the most basic ethical trait is honesty, and this is evident in Jackson’s initial reaction of pointing out the issue to Mary Brown, the corporate controller. From the foregoing, not taking action concerning the under applied overhead is not ethical as it will lead to dishonest values both to the external auditors as well as the Audit Committee of the Board of Directors.
The second alternative involves making attempts to convince Brown to make adjustments as well as informing the external auditors of her actions. Attempting to convince Brown to make adjustments is an appropriate action. This is because Jackson will be communicating to his direct superior without overstepping her authority. In addition, diagonal communication is good for any business and this case would not be different. On the other hand, Jackson informing the external auditors of Brown’s actions is not an appropriate action. This is because by doing so, Jackson might jeopardize the job or even career of Brown, fellow employee, as well as the existence of the business itself. Jackson should therefore desist from informing the external auditors of Brown’s actions.
The third alternative involves informing the Audit Committee of the Board of Directors and giving appropriate accounting data. This course of action is appropriate. First, the issue of under applied overhead needs to be addressed as it results in less income as well as incorrect information to external auditors. Therefore, Jackson should inform the Audit Committee of the Board of Directors and by doing so it will result in both solving the problem as well as keeping the problem internal. This action will also ensure that Brown’s actions are corrected without necessarily denting her job or career.
The first step Jackson should take is to compute the accounting data again for confirmation purposes and gather the appropriate accounting information that supports his findings. Jackson should then approach the next level of authority, in this case the Audit Committee of the Board of Directors, and present them with the gathered data. In addition, Jackson should explicitly explain the effects of the under applied manufacturing overhead and the need for its adjustment. By following these steps, Jackson will not only have reported the matter to the correct authority, the Audit Committee of the Board of Directors, who will make the final decision on the way forward, but also helped in keeping the matter internal to the company.
McLaughlin, I. A. (2016). Corporate Governance. Case study and analysis.