Easecom company budgeted income statement for 2008 in

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Easecom Company Budgeted Income Statement for 2008 (in thousands) Revenues Equipment ($6,000 × 1.06 × 1.10) $6,996 Maintenance contracts ($1,800 × 1.06) 1,908 Total revenues $8,904 Cost of goods sold ($4,600 × 1.03 × 1.06) 5,022 Gross margin 3,882 Operating costs: Marketing costs ($600 + $250) 850 Distribution costs ($150 × 1.06) 159 Customer maintenance costs ($1,000 + $130) 1,130 Administrative costs 900 Total operating costs 3,039 Operating income $ 843 6.32 (15 min.) Responsibility of purchasing agent. The time lost in the plant should be charged to the purchasing department. The plant manager probably should not be asked to underwrite a loss due to failure of delivery over which he had no supervision. Although the purchasing agent may feel that he has done everything he possibly could, he must realize that, in the whole organization, he is the one who is in the best position to evaluate the situation. He receives an assignment. He may accept it or reject it. But if he accepts, he must perform. If he fails, the damage is evaluated. Everybody makes mistakes. The important point is to avoid making too many mistakes and also to understand fully that the extensive control reflected in responsibility accounting is the necessary balance to the great freedom of action that individual executives are given. Discussions of this problem have again and again revealed a tendency among students (and among accountants and managers) to “fix the blame”––as if the variances arising from a responsibility accounting system should pinpoint misbehavior and provide answers. The point is that no accounting system or variances can provide answers. However, variances can lead to questions. In this case, in deciding where the penalty should be assigned, the student might inquire who should be asked––not who should be blamed. Classroom discussions have also raised the following diverse points: (a) Is the railroad company liable? (b) Costs of idle time are usually routinely charged to the production department. Should the information system be fine-tuned to reallocate such costs to the purchasing department? (c) How will the purchasing managers behave in the future regarding willingness to take risks? The text emphasizes the following: Beware of overemphasis on controllability. For example, a time-honored theme of management is that responsibility should not be given without accompanying authority. Such a guide is a useful first step, but responsibility accounting is more far-reaching. The basic focus should be on information or knowledge, not on control. The key question is: Who is the best informed? Put another way, “Who is the person who can tell us the most about the specific item, regardless of ability to exert personal control?” 6-20
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6-33 (60 min.) Comprehensive problem with ABC costing 1. Revenue Budget For the Month of April Units Selling Price Total Revenues Cat-allac 500 $160 $ 80,000 Dog-eriffic 300 250 75,000 Total $155,000 2.
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