Question

Jahful Foods Inc., a manufacturer of breakfast cereals and snack bars, has experienced several years of dy growth in sales, profits, and dividends while maintaining a relatively low level of debt. The board of directors has adopted a long-run strategy to maximize the value of the shareholders' investment. In order to achieve this goal, the board of directors established the following five-year financial objectives. • Increase sales by 12 percent per year. • Increase income before taxes by 15 percent per year. • Maintain long-term debt at a maximum of 16 percent of assets, These financial objectives have been attained for the past three years. At the beginning of last year, the president of Healthful Foods, Andrea Donis, added a fourth financial objective of maintaining cost of goods sold at a maximum of 70 percent of sales. This goal also was attained last year. The budgeting process at Healthful Foods is to be directed toward attaining these goals for the worthcoming year, a difficult task with the economy in a prolonged recession. In addition, the increased emphasis on eating healthful foods has driven up the price of ingredients used by the company

Answer 1

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Answer: Requirement : Strategic planning identifies the overall objective of an organization and generally considers the impact of external factors such as competitive forces marleet demand dechrological changes when identifying overall objectives. This becomes an inpor to the financial planning and analysis process Master budgeting is the quantitative expression of plans evolving from strategic planning by way of financial planning and analysis. The time horison for budgeting is generally a year, or an operating cycle, and greater attention is focused on internal factors than on external factors. (8947750 - $ Requirement Q . For each of the financial objectives established by the board of directors and president of Healthful foods Inc., the Calcolations to detumine whether John Winslow's budget attains these objectives are presented in the following table: calculation of Financial objectives: Healthful Foods Inc. objective Attained/ Calcolations Not Attained Increase sales by 121 Not attained ($850 000 X 1012 = $ 952000) =1105). Increase before tax income by 151. Attained ($126750 - $105000) $105.000 ($ 10500ot 1.15 = 4 120750) & Maintain long term debt at cor below Attained $368000 $ 2050000 = 15:10 16 To of assets crounded) (1 2050ooox .16 4 328000) Maintain cost of goods sold at $ 669500/5947750 (or) below 70% of Sales ($947750 x .70 = $ 663425) 154. Not attained - Fo.6%. (rounded)

Requirement : The accounting adjustments contemplated by John Winslow are unethical because they will result in intentionally overstating income by understating the cost of goods sold. The sperfic Standards of ethical conduct for management accountants violated by winslow are as follows: Competence. By making the accounting adjustments, winslow violated the competency Standard by not preparing financial statements in accordance with technical standards. Integrity winslow violated the integrity standard by engaging in an activity that prejudiced his ability to carry out his doties ethically and by engaging in an activity that appears to be a conflict of intereste credibility. By overstating the inventory and reclassifying certain costs, winslow has violated the credibility standard. He has failed to communicate information farly and objectively and has failed to disclose all relevant information that would influence the user's understanding of the report.