Part 1:
The president of Freeman Industries Inc. made the following statement in the annual report to shareholders: “The founding family and majority shareholders of the company do not believe in using debt to finance future growth. The founding family learned from hard experience during Prohibition and the Great Depression that debt can cause the loss of flexibility and eventual loss of corporate control. The company will not place itself at such risk again. As such, all future growth will be financed either by stock sales to the public or by internally generated resources.”
Assignment
Write a brief memo to the company’s president, Boss Freeman, outlining the errors in his logic. Be sure to include in your memo the following:
Explain how the financial statements, balance sheet, statement of cost of goods, and income state have errors, and provide a solution.
Describe the unusual items on the income statement and a solution to fix it.
Describe how the cash flow activities prove error in his logic.
This part of your Unit VII submission must be at least one full page in length. Adhere to APA Style when creating citations and references for this assignment.
Part 2:
Jamarcus Bradshaw, plant manager of the papermaking mill, was looking over the cost of production reports for July and August for the Papermaking Department. The reports revealed the following:
See Chart in attachment –
Jamarcus was concerned about the increased cost per ton from the output of the department. As a result, he asked the plant controller to perform a study to help explain these results. The controller, Leann Brunswick, began the analysis by performing some interviews of key plant personnel in order to understand what the problem might be. Excerpts from an interview with Len Tyson, a paper machine operator, follow:
Len: We have two papermaking machines in the department. I have no data, but I think paper machine No. 1 is applying too much pulp and, thus, is wasting both conversion and materials resources. We haven’t had repairs on paper machine No. 1 in a while. Maybe this is the problem.
Leann: How does too much pulp result in wasted resources?
Len: Well, you see, if too much pulp is applied, then we will waste pulp material. The customer will not pay for the extra product; we just use more material to make the product. Also, when there is too much pulp, the machine must be slowed down in order to complete the drying process. This results in additional conversion costs.
Leann: Do you have any other suspicions?
Len: Well, as you know, we have two products-green paper and yellow paper. They are identical except for the color. The color is added to the papermaking process in the paper machine. I think that during August these two color papers have been behaving very differently. I don’t have any data, but it just seems as though the amount of waste associated with the green paper has increased.
Leann: Why is this?
Len: I understand that there has been a change in specifications for the green paper, starting near the beginning of August. This change could be causing the machines to run poorly when making green paper. If this is the case, the cost per ton would increase for green paper.
Leann also asked for a database printout providing greater detail on August’s operating results.
September 9
Requested by: Leann Brunswick
Papermaking Department – August detail
See Chart in attachment
Assignment:
Prior to preparing a report, Leann resigned from Georgia Paper Company to start her own business. You have been asked to take the data that Leann collected and write a memo to Jamarcus Bradshaw with a recommendation to management. Your memo should include analysis of the August data to determine whether the paper machine or the paper color explains the increase in the unit cost from July. Include any supporting schedules that are appropriate. Round any calculations to the nearest cent.
For this assignment, you will be required to: Describe the use of job order cost information for decision-making. This should include an explanation of how job order costing is used to track the costs of specific products or projects, and how this information can be used to make informed decisions about pricing, production, and other aspects of a company’s operations.
Explain the use of a cost of production report in evaluating a company’s performance. This should include a discussion of what information is included in a cost of production report, how it is used to assess the efficiency and effectiveness of a company’s production processes, and how it can be used to identify areas for improvement.
Illustrate the use of activity-based costing information in decision-making. This should include an explanation of how activity-based costing differs from traditional costing methods, and how it can be used to more accurately assign costs to specific products or activities. You should also provide examples of how this information can be used to make informed decisions about pricing, production, and other aspects of a company’s operations.
Your assignment should be well-written and well-organized, with clear and concise language and appropriate citation of any sources you use. You should aim to provide a comprehensive and detailed discussion of each of the objectives listed above, using relevant examples and supporting evidence to illustrate your points. Overall, your assignment should demonstrate a thorough understanding of the concepts related to job order costing, cost of production reports, and activity-based costing, and how these tools can be used for decision-making in a business setting.
This part of your Unit VII submission must be at least 3 pages in length. Adhere to APA Style when creating citations and references for this assignment.
