Syracuse Beverages Inc. has three plants that make and bottle cola, lemon-lime, and miscellaneous flavored beverages, respectively. The raw materials, labor costs, and automated technology are comparable among the three plants. Top management has initiated an incentive compensation plan whereby the workers and managers of the plant with the lowest unit cost per bottle will receive a year-end bonus. The results, approved by the plant manager and reported by the plant controllers at each location, were as follows ITEM DEWITT FAYETTEVILLE MANLIUS Materials 200,000 450,000 325,000 Labor 170,000 375,000 250,000 Overhead 340,000 750,000 500,000 TOTAL 710,000 1575,000 1075,000 Equivalents Units of Production Completed 3500,000 6200,000 6450,000 Ending Work in process 100,000(50% complete) 400,000(25% complete Equivalent units 3550,000 6300,000 6450,000 Unit Cost $0.20 $0.25 $0.167 When provided copies of the results as a justification for distributing the bonus to the Manlius employees, the plant controllers at DeWitt and Fayetteville accused Manlius of manipulating the inventory figures. Reviewing the above schedule, what do you think is the nature of the accusation and how would such action affect the unit cost computation? Is there anything in the Institute of Management Accountants (IMA) Code of Professional Ethics that the Manlius plant controller should be aware of in this situation? Assume that the Manlius plant controller revises the unit cost to more accurately reflect reality. What should she do if the plant manager insists that the unit cost computation remain as is?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Syracuse Beverages Inc. has three plants that make and bottle cola, lemon-lime, and miscellaneous flavored beverages, respectively. The raw materials, labor costs, and automated technology are comparable among the three plants. Top management has initiated an incentive compensation plan whereby the workers and managers of the plant with the lowest unit cost per bottle will receive a year-end bonus. The results, approved by the plant manager and reported by the plant controllers at each location, were as follows

ITEM	DEWITT	FAYETTEVILLE	MANLIUS
Materials	200,000	450,000	325,000
Labor	170,000	375,000	250,000
Overhead	340,000	750,000	500,000
TOTAL	710,000	1575,000	1075,000
Equivalents Units of Production
Completed	3500,000	6200,000	6450,000
Ending Work in process	100,000(50% complete)	400,000(25% complete
Equivalent units	3550,000	6300,000	6450,000
Unit Cost	$0.20	$0.25	$0.167

When provided copies of the results as a justification for distributing the bonus to the Manlius employees, the plant controllers at DeWitt and Fayetteville accused Manlius of manipulating the inventory figures. Reviewing the above schedule, what do you think is the nature of the accusation and how would such action affect the unit cost computation?
Is there anything in the Institute of Management Accountants (IMA) Code of Professional Ethics that the Manlius plant controller should be aware of in this situation?
Assume that the Manlius plant controller revises the unit cost to more accurately reflect reality. What should she do if the plant manager insists that the unit cost computation remain as is?

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