Reference no: EM132556710

Question - There are 30,000 cases as projected annual sales of kathia's Company.

Selling Price: 30.00 per cases

There are 2 options to which process should be used

The first process would have a variable cost of P10 per case produced and fixed costs of P100,000. The second process would have a variable cost of P6 per case and fixed costs of P200,000.

If the first process were chosen, Ramona Lavigne, a good friend, would be appointed as the line supervisor. If the second process were chosen, Ramona and an entire line of laborers would be laid off. After some consideration, Frankie revised the projected sales downward to 22,000 cases.

She believed that the revision downward justified. Since it would lead the divisional manager to choose the manual system, it showed a sensitivity to the needs of current employees-a sensitivity that she was afraid her divisional manager did not possess. He was too focused on quantitative factors in his decision making and usually ignored the qualitative aspects.

Requirements -

a. Compute the break-even point for each process.

b. Compute the sales volume for which the two process are equally profitable. Identify the range of sales for which the manual process is more profitable than the automated process. Identify the range of sales for which the automated process is more profitable than the manual process. Why did the divisional manager want the sales forecast?

c. Discuss Frankie's decision to alter the sales forecast. Do you agree with it? Did she act ethically? Was her decision justified since it helped a number of employees retain their employment? Should the impact on employees be factored into decisions? In fact, is it unethical not to consider the impact of decisions on employees?

d. Even though Frankie is not a management accountant, do any of the ethical standards for management accountants apply? Explain.