In Each of the Following Situations,identify Whether the Setting Is

question 31

Essay

In each of the following situations,identify whether the setting is primarily financial accounting or managerial accounting.
a.Abba Company purchased a new telephone system costing $132,000 for its sales division.The new phone system will be depreciated using the straight-line method over a period of five years and has an estimated salvage value of $5,000.

b.Bandex Company has had several customers who are experiencing the negative effects of the downturn in the economy.As a result,the company believes its allowance for doubtful accounts should be increased from 1% of credit sales to 1.5% of credit sales.

c.Cortez,Inc.has experienced a decline in net income over the past three years.The engineering department is considering redesigning a product to eliminate waste and inefficiency in the production process.

d.The sales manager of Decca Corporation believes one salesman is creating fictitious sales to inflate his commission.The sales manager has asked the controller for a detailed report of sales by salesman.

e.Essex,Inc.executives are meeting to analyze the company's actual results compared to budgeted amounts.

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Definitions:

Work in Process

Inventory that represents partially completed goods which are still in the production process.

Actual Manufacturing Overhead Cost

The actual costs incurred for indirect manufacturing expenses, such as utilities, rent, and maintenance.

Year

A period of time consisting of 12 months or 365 days, used as a basic unit for measuring time in relation to the earth's orbit around the sun.

Cost of Goods Available for Sale

The total cost of inventory that a business has ready for sale, comprising both beginning inventory plus the cost of goods manufactured.