Question

In: Accounting

A manufacturing company allows employees to purchase, at cost, manufacturing materials such as metal and lumber,...

A manufacturing company allows employees to purchase, at cost, manufacturing materials such as metal and lumber, for personal use. To purchase materials for personal use, an employee must complete a materials requisition form which then must be approved by the employee's immediate supervisor. The assistant cost accountant then charges the employee an amount based on the manufacturing company's net purchase cost. An employee, who happens to be the assistant cost accountant, is in the process of replacing a deck on his home and has requisitioned lumber for personal use, which has been approved in accordance with company policy. In computing the cost of the lumber, the employee (the assistant cost accountant) reviewed all the purchase invoices for the past year. The employee then used the lowest price to compute the amount due for the company for the lumber. Discuss whether this is a good company policy, include if there are proper internal controls in place. Discuss if the assistant cost accountant behaved in an ethical way. Discuss if there should be any type of corrective action. How should the company management handle this situation? Feel free to share any situations that sound similar in the real world. Follow the minimum requirements for discussion board posts located in the general discussion area. Recall, those are the minimum requirements, more posts are always encouraged.

Solutions

Expert Solution

The IMA (institute of management Accountant) is the perfect organisation for managerial accounting. purposes subsequently needs to be reported as a part of CGS, in instances where for which finished goods. It's based on ethical laws which includes (Authority, responsibility and honesty). One should be clear with all these ethical laws in order to familiar with management Accountant. The IMA always makes sure that, usage of accounting skills in an appropriate manner. So the maximum efficiency of any possibility can be achieved. Also the managerial accountants are governed by certain law's and ethics. It's clear that, the managerial accountants are relied upon the ethical laws.

The policy of this types of organization lacks in internal control such as productivity and realibility of the company's maximum capacity. First the company should make sure about the price of a product i.e. the cash flow statement to be defined crearly.

This types of organization the employees have the authority to request for meterials and it's may not same as the employee prepare invoice after purchase of some products. And it can be said that, this authority can be mis used of the provisions.

The assistant cost accountant clearly violated the laws and ethics as a authorised person he is totally abide by laws and ethics. But he is proof that he has not the ability to become a cost accountant by billing lower cost to himself to gain a unfair profits.


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