Ethical case: In this case out of the three departments Person B has no interest in plumbing department. B wants to reallocate the company’s fixed cost of other two divisions to the plumbing divisions in order to improve the income. But it does not create any changes thereby, the board of directors suggested to close the plumbing department. To discuss: If a division is reporting losses, does that mean that it should be closed.

Question

Want to see the full answer?

Answer 1

Question

Chapter 7, Problem 7.6BYP

(a)

To determine

Ethical case:

In this case out of the three departments Person B has no interest in plumbing department. B wants to reallocate the company’s fixed cost of other two divisions to the plumbing divisions in order to improve the income. But it does not create any changes thereby, the board of directors suggested to close the plumbing department.

To discuss: If a division is reporting losses, does that mean that it should be closed.

(b)

To determine

Fixed Cost:

It is a cost which is constant in the short run, it is not related to any change in the production of goods or service, it will be fixed disregarding of increase or decrease in output. Fixed cost is generally incurred on fixed assets in long run.

To explain: Reallocation of fixed costs across the division was unethical.

(c)

To determine

To explain: What Person B should do?

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Students have asked these similar questions

Can you explain this general accounting question using accurate calculation methods?

What amount should Kollywood record on the books for this machine?

Kevin Richards and Kyle Smith started Book Haven as a corporation, each contributing $65,000 in cash to start the business and receiving 6,000 shares of stock. At the end of the first year of operations on December 31, 2024, the following financial details were recorded: cash on hand and in the bank was $58,400, amounts due from customers for book sales totaled $38,500, and equipment was valued at $62,000. The company owed $12,500 to publishers for books purchased, and there was a one-year note payable to the bank for $7,400. No dividends were declared or paid during the year. Using the retained earnings equation with an opening balance of $0, calculate the net income for the year ending December 31, 2024.

Answer 2

Question

Chapter 7, Problem 7.6BYP

(a)

To determine

Ethical case:

In this case out of the three departments Person B has no interest in plumbing department. B wants to reallocate the company’s fixed cost of other two divisions to the plumbing divisions in order to improve the income. But it does not create any changes thereby, the board of directors suggested to close the plumbing department.

To discuss: If a division is reporting losses, does that mean that it should be closed.

(b)

To determine

Fixed Cost:

It is a cost which is constant in the short run, it is not related to any change in the production of goods or service, it will be fixed disregarding of increase or decrease in output. Fixed cost is generally incurred on fixed assets in long run.

To explain: Reallocation of fixed costs across the division was unethical.

(c)

To determine

To explain: What Person B should do?

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Answer 3

Question

Chapter 7, Problem 7.6BYP

(a)

To determine

Ethical case:

In this case out of the three departments Person B has no interest in plumbing department. B wants to reallocate the company’s fixed cost of other two divisions to the plumbing divisions in order to improve the income. But it does not create any changes thereby, the board of directors suggested to close the plumbing department.

To discuss: If a division is reporting losses, does that mean that it should be closed.

(b)

To determine

Fixed Cost:

It is a cost which is constant in the short run, it is not related to any change in the production of goods or service, it will be fixed disregarding of increase or decrease in output. Fixed cost is generally incurred on fixed assets in long run.

To explain: Reallocation of fixed costs across the division was unethical.

(c)

To determine

To explain: What Person B should do?

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Answer 4

Question

Chapter 7, Problem 7.6BYP

(a)

To determine

Ethical case:

In this case out of the three departments Person B has no interest in plumbing department. B wants to reallocate the company’s fixed cost of other two divisions to the plumbing divisions in order to improve the income. But it does not create any changes thereby, the board of directors suggested to close the plumbing department.

To discuss: If a division is reporting losses, does that mean that it should be closed.

(b)

To determine

Fixed Cost:

It is a cost which is constant in the short run, it is not related to any change in the production of goods or service, it will be fixed disregarding of increase or decrease in output. Fixed cost is generally incurred on fixed assets in long run.

To explain: Reallocation of fixed costs across the division was unethical.

(c)

To determine

To explain: What Person B should do?

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Answer 5

Chapter 7, Problem 7.6BYP

(a)

To determine

Ethical case:

In this case out of the three departments Person B has no interest in plumbing department. B wants to reallocate the company’s fixed cost of other two divisions to the plumbing divisions in order to improve the income. But it does not create any changes thereby, the board of directors suggested to close the plumbing department.

To discuss: If a division is reporting losses, does that mean that it should be closed.

(b)

To determine

Fixed Cost:

It is a cost which is constant in the short run, it is not related to any change in the production of goods or service, it will be fixed disregarding of increase or decrease in output. Fixed cost is generally incurred on fixed assets in long run.

To explain: Reallocation of fixed costs across the division was unethical.

(c)

To determine

To explain: What Person B should do?

Answer 6

Chapter 7, Problem 7.6BYP

(a)

To determine

Ethical case:

In this case out of the three departments Person B has no interest in plumbing department. B wants to reallocate the company’s fixed cost of other two divisions to the plumbing divisions in order to improve the income. But it does not create any changes thereby, the board of directors suggested to close the plumbing department.

To discuss: If a division is reporting losses, does that mean that it should be closed.

Answer 7

Chapter 7, Problem 7.6BYP

(a)

To determine

Ethical case:

In this case out of the three departments Person B has no interest in plumbing department. B wants to reallocate the company’s fixed cost of other two divisions to the plumbing divisions in order to improve the income. But it does not create any changes thereby, the board of directors suggested to close the plumbing department.

To discuss: If a division is reporting losses, does that mean that it should be closed.

Answer 8

(b)

To determine

Fixed Cost:

It is a cost which is constant in the short run, it is not related to any change in the production of goods or service, it will be fixed disregarding of increase or decrease in output. Fixed cost is generally incurred on fixed assets in long run.

To explain: Reallocation of fixed costs across the division was unethical.

Answer 9

(b)

To determine

Fixed Cost:

It is a cost which is constant in the short run, it is not related to any change in the production of goods or service, it will be fixed disregarding of increase or decrease in output. Fixed cost is generally incurred on fixed assets in long run.

To explain: Reallocation of fixed costs across the division was unethical.

Answer 10

(c)

To determine

To explain: What Person B should do?

Answer 11

(c)

To determine

To explain: What Person B should do?

Answer 12

Expert Solution & Answer

Answer 13

Expert Solution & Answer

Answer 14

Want to see the full answer?

Check out a sample textbook solution

See solution

Answer 15

Ch. 7 - What steps are frequently involved in managements...Ch. 7 - Prob. 2Q Ch. 7 - Incremental analysis involves the accumulation of...Ch. 7 - Sydney Greene asks for your help concerning the...Ch. 7 - What data are relevant in deciding whether to...Ch. 7 - Prob. 6Q Ch. 7 - Prob. 7Q Ch. 7 - Prob. 8Q Ch. 7 - What are joint products? What accounting issue...Ch. 7 - Prob. 10Q

Solution Summary: The author explains that if a division is reporting losses, it does not mean that it should be closed.

Videos

To explain: What Person B should do?

Want to see the full answer?

Chapter 7 Solutions