parties of any potential conflict 5 refrain from engaging in any activity that

Parties of any potential conflict 5 refrain from

This preview shows page 47 - 54 out of 54 pages.

parties of any potential conflict, (5) refrain from engaging in any activity that would prejudice their ability to carry out their duties ethically, (6) communicate information fairly and objectively, (7) disclose fully all relevant information that could reasonably be ex- pected to influence an intended user’s understanding of the re- ports, comments, and recommendations presented. ATC 3-5 (continued) 3-47
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Chapter 3 Analysis of Cost, Volume, and Pricing to Increase Profitability It is important to note that deliberate manipulation with the intent to deceive shareholders is beyond the boundaries of mere ethical violations. Such actions constitute fraud that could lead to crimin- al penalties. e. The Sarbanes-Oxley Act of 2002 charges both the CEO and the CFO with the ultimate responsibility for the accuracy of the com- pany’s financial statements and the accompanying notes. An in- tentional misrepresentation is punishable by a fine of up to $5 mil- lion and imprisonment of up to 20 years. The penalty provisions of the law deter would-be offenders from committing financial frauds. 3-48
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Chapter 3 Analysis of Cost, Volume, and Pricing to Increase Profitability ATC 3-6 Screen capture of cell values: 3-49
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Chapter 3 Analysis of Cost, Volume, and Pricing to Increase Profitability ATC 3-6 (continued) Screen capture of cell formulas: 3-50
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Chapter 3 Analysis of Cost, Volume, and Pricing to Increase Profitability ATC 3-7 Screen of cell values: 3-51
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Chapter 3 Analysis of Cost, Volume, and Pricing to Increase Profitability ATC 3-7 (continued) Screen of cell formulas: 3-52
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Chapter 3 Analysis of Cost, Volume, and Pricing to Increase Profitability ATC 3-7 (continued) 3-53
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Chapter 3 Analysis of Cost, Volume, and Pricing to Increase Profitability Chapter 3 Comprehensive Problem Requirement a Magnificent Modems, Inc. Income Statement For the Year Ended December 31, 2010 Sales revenue ($120 x 5,000 units) $600,000 Variable costs Direct materials ($40 x 5,000 units) (200,000) Direct labor ($25 x 5,000 units) (125,000) Manufacturing supplies ($4 x 5,000 units) (20,000) Sales commission ($6 x 5,000 units) (30,000) Variable costs (375,000) Contribution margin 225,000 Fixed costs Depreciation on manufacturing equipment (60,000) Rent for manufacturing facility (50,000) Depreciation on administrative equipment (12,000) Administrative expenses (71,950) Fixed cost (193,950) Net income $31,050 Requirement b Break-even in units Fixed cost $193,950 ------------------------------- = -------------- = 4,310 units Contribution margin/unit $45 Break-even in dollars 4,310 units x $120 = $517,200 Requirement c Budgeted sales - Break-even sales $600,000 - $517,200 ---------------------------------------------------- = ------------------------------ = 13.8% Budgeted sales $600,000 3-54
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