Question:06 Identify the major problems in this situation and explain how they impact the organization. Consider both behavioral and analytical factors. Specifically, how might managerial accounting concepts, tools, or techniques be applied to help resolve this dilemma? What are possible consequences of applying the same to this dilemma? Briefly explain.Orange Electronics has been experiencing declining profit margins and has been looking for ways to increase operating income. It cannot raise selling prices for fear of losing business to its competitors. It must either cut costs or improve productivity. The company uses a standard cost system to evaluate the performance of the soldering department. It investigates all unfavorable variances at the end of the month. The soldering department rarely completes the operations in less time than the standard allows (which would result in a favorable variance).In most months, the variance is zero or slightly unfavorable. Reasoning that the application of lower standard costs to the products manufactured will result in improved profit margins, the production manager has recommended that all standard times for soldering operations be drastically reduced. The production manager has informed the soldering personnel that she expects the soldering department to meet these new standards. Occasionally, public accounting firms are engaged to report on specified elements, accounts, and items of financial statements. a. Discuss types of reports that may be provided for a nonpublic company for specified elements, accounts, and items of financial statements. b. Why should reports on the application of agreed-upon procedures to information be restricted to specified users? For the following scenario, evaluate whether the situation involves possible violations of the AICPA's Code of Professional Conduct. State: 1) The relevant rule or interpretation that applies to this scenario (Rule number and title); 2) Whether there is a violation of the Code (yes or no); and 3) The rationale in deciding whether there is a violation. A CPA firm has incorporated and started providing public accounting services. The only shareholders in the corporation are existing employees of the organization, including partners, staff who are CPAs, staff who are not CPAs, and administrative personnel.

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Chapter16: Statement Of Cash Flows
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Question:06
Identify the major problems in this situation and explain
how they impact the organization. Consider both
behavioral and analytical factors. Specifically, how might
managerial accounting concepts, tools, or techniques be
applied to help resolve this dilemma? What are possible
consequences of applying the same to this dilemma?
Briefly explain.Orange Electronics has been experiencing
declining profit margins and has been looking for ways to
increase operating income. It cannot raise selling prices for
fear of losing business to its competitors. It must either cut
costs or improve productivity. The company uses a
standard cost system to evaluate the performance of the
soldering department. It investigates all unfavorable
variances at the end of the month. The soldering
department rarely completes the operations in less time
than the standard allows (which would result in a favorable
variance).In most months, the variance is zero or slightly
unfavorable. Reasoning that the application of lower
standard costs to the products manufactured will result in
improved profit margins, the production manager has
recommended that all standard times for soldering
operations be drastically reduced. The production manager
has informed the soldering personnel that she expects the
soldering department to meet these new standards.
Occasionally, public accounting firms are engaged to
report on specified elements, accounts, and items of
financial statements.
a. Discuss types of reports that may be provided for a
nonpublic company for specified elements, accounts, and
items of financial statements.
b. Why should reports on the application of agreed-upon
procedures to information be restricted to specified users?
For the following scenario, evaluate whether the situation
involves possible violations of the AICPA's Code of
Professional Conduct. State:
1) The relevant rule or interpretation that applies to this
scenario (Rule number and title);
2) Whether there is a violation of the Code (yes or no); and
3) The rationale in deciding whether there is a violation.
A CPA firm has incorporated and started providing public
accounting services. The only shareholders in the
corporation are existing employees of the organization,
including partners, staff who are CPAs, staff who are not
CPAs, and administrative personnel.
Transcribed Image Text:Question:06 Identify the major problems in this situation and explain how they impact the organization. Consider both behavioral and analytical factors. Specifically, how might managerial accounting concepts, tools, or techniques be applied to help resolve this dilemma? What are possible consequences of applying the same to this dilemma? Briefly explain.Orange Electronics has been experiencing declining profit margins and has been looking for ways to increase operating income. It cannot raise selling prices for fear of losing business to its competitors. It must either cut costs or improve productivity. The company uses a standard cost system to evaluate the performance of the soldering department. It investigates all unfavorable variances at the end of the month. The soldering department rarely completes the operations in less time than the standard allows (which would result in a favorable variance).In most months, the variance is zero or slightly unfavorable. Reasoning that the application of lower standard costs to the products manufactured will result in improved profit margins, the production manager has recommended that all standard times for soldering operations be drastically reduced. The production manager has informed the soldering personnel that she expects the soldering department to meet these new standards. Occasionally, public accounting firms are engaged to report on specified elements, accounts, and items of financial statements. a. Discuss types of reports that may be provided for a nonpublic company for specified elements, accounts, and items of financial statements. b. Why should reports on the application of agreed-upon procedures to information be restricted to specified users? For the following scenario, evaluate whether the situation involves possible violations of the AICPA's Code of Professional Conduct. State: 1) The relevant rule or interpretation that applies to this scenario (Rule number and title); 2) Whether there is a violation of the Code (yes or no); and 3) The rationale in deciding whether there is a violation. A CPA firm has incorporated and started providing public accounting services. The only shareholders in the corporation are existing employees of the organization, including partners, staff who are CPAs, staff who are not CPAs, and administrative personnel.
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ISBN:
9781947172685
Author:
OpenStax
Publisher:
OpenStax College