Using the cost terminology introduced mentioned in the preceding discussion. What are the relative merits of the T projected revenue to the station stics of Pinellas Printer urtment rently manulactures both the electronic Company manufactures printers for use with home computing systems. The firm cur e components for its printers and the plastic cases in which y received a proposal from the devices are enclosed. Jim Cassanitti. the production manager, recentl Universal Plastics Corporation to manufacture the cases for the printers. If the cases are purch side, Pinellas Printer Company will be able to close down it whether to accept the bid from Universal Plastics Corporation. Cassanitti a s Printer Case Department. To help decide asked Pinellas\' controller to prepare an analysis of the costs that would be saved if the Printer Case Department were closed. Included in the controller\'s list of annual cost savings were the following items Building rental (The Printer Case Department occupies one-sixth cf $30,100 $48,000 . the lactory building, which Pinellas rents for $180,600 per year Salary of the Printer Case Department supervisor In a lunchtime conversation with the controller, Cassanitti learned that Pinellas Printer Comp was currently renting space in a warehouse for $41,000. The space is used to store completed printers. If the Printer Case Department were discontinued, the entire storage operation ory building and occupy the space vacated by the closed department. Cassan could be r tti also learned that the e Printer Case Department would be retained by Pinellas even if the department were supervisor of th closed. The supervisor would be assigned the job of managing the assembly department, whose super visor recently gave notice of his retirement. All of Pinellas Printer Company\'s department supervisors earn the same salary Required I. You have been hired as a consultant by Cassanitti to advise him in his decision. Write a memo to Cassanitti commenting on the costs of space and supervisory salaries included in the controller\'s cost analysis. Explain in your memo about the \"real\" costs of the space occupied by the Printer Case Department and the supervisor\'s salary. What types of costs are these? Independent of your response to requirement (1), suppose that Pinellas Printer Company\'s control 2. ler had been approached by his friend Jack Westford, the assistant supervisor of the Printer Case Department. Westford is worried that he will be laid off if the Printer Case Department is clo down sed Westford has asked his friend to understate the cost savings from closing the department, in o slant the production manager\'s decision toward keeping the department in operation. Comment on the controller\'s ethical responsibilities
1.
Saving in costs if the Printer case department is closed:
Factory building: No savings(The space vacated will be used for storage of printers)
Warehouse rent :$41,000
Supervisor Salary: $48,000
Supervisor will be allotted in job in Assembly department. If the department is not closed, a new supervisor needed to be recruited in place of retiring supervisor of assembly department .
Total Savings in cost=41000+48000=$89,000
The cost of space occupied by the printer case department and the supervisor’s salary are sunk costs. These will be incurred after closure of the department. However, the resources are employed in other areas of the organization and that has resulted in cost saving for the company
2
According to Standards of Ethical Conduct of Management Accountants:
Management accountants are expected to maintain integrity and credibility in the course of their duties.
Integrity principle requires management accountants to avoid conflict of interest . The credibility principle requires management accountants to communicate information fairly and objectively.
Trying to help his friend by distortion of information will result in conflict of interest. Communication incorrect information will result in affecting credibility
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