Assume that you are CFO of Conquest, Inc., and that you have just received an income statement and balance sheet from plant accountant Jim Sway in Bend, Oregon
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Assume that you are CFO of Conquest, Inc., and that you have just received an income statement and balance sheet from plant accountant Jim Sway in Bend, Oregon. In your conversations with Jim you learn that, in the recent reporting period, plant manager Darlene Cosky asked that inventory transportation cost, the cost of repairing the plant parking lot, and the newly installed plant landscaping costs all be allocated to cost of production. In addition, when these allocations took place, the plant produced many more bicycles than were sold, creating significant increases in the amount of inventory on hand. As a result, most of the costs described by Jim have been assigned to the inventory on hand (included as part of inventory costs in the balance sheet) but have not been assigned to cost of goods sold (reported in the income statement). Furthermore, during the recent reporting period both Darlene and Jim earned significant bonuses based on plant profitability. What, if anything, would you do as the CFO?