Josephson and Associates Is a Consulting Firm That Spends $60,000

question 6

Essay

Josephson and Associates is a consulting firm that spends $60,000 per year advertising the company's brand names and trademarks.Gross margin on sales after taxes is up $66,000 each year because of these advertising expenditures.For the purposes of this problem,assume that the firm makes all advertising expenditures on the first day of each year and that the $66,000 extra after-tax gross margin on sales occurs on the first day of the next year.Excluding any advertising assets or profits,
Josephson has $200,000 of other assets that have produced an after-tax income of $20,000 per year.Josephson follows a policy of declaring dividends each year equal to net income,and it has a cost of capital of 10 percent per year.
Required:
a.Is the advertising policy a sensible one? Explain.
b.How should accounting report the expenditures for advertising in Josephson's financial statements to reflect accurately the managerial decision of advertising at the rate of $60,000 per year? In other words,how can the firm account for the advertising expenditures in such a way that the accounting rate of return for the advertising project and the rate of return on assets for the firm reflect the 10-percent return from advertising?

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Definitions:

Competency-Based

This approach focuses on identifying and developing specific skills and competencies within an organization to optimize performance and productivity.

Job Analyses

The systematic process of collecting and analyzing information about the duties, responsibilities, and the context of a job, to identify required skills and qualifications.

Organizational Success

The achievement of the goals and objectives set by an organization, often measured by metrics such as profitability, market share, or stakeholder satisfaction.

Job Specification

A detailed description of the skills, education, and experience required to perform a job.