Please refer to the end-of-chapter Take It Further assignment TIF 4-1 Activity-Based Costing and External Reporting.
The controller of Tri Con Global Systems Inc. has developed a new costing system that traces the cost of activities to products. The new system is able to measure post-manufacturing activities, such as selling, promotional, and distribution activities, and allocate these activities to products in a manner that provides a more complete view of the company’s product costs. This system produces better strategic information about the relative profitability of product lines.
In the course of implementing the new costing system, the controller realized that the company’s current-period GAAP net income would increase significantly if the new product cost information were used for inventory valuation on the financial statements. The controller has been under intense pressure to improve the company’s net income, and this would be an easy and effective way for her to help meet the company’s short-term net income goals. As a result, she has decided to use the new costing system to determine GAAP net income.
REQUIREMENT 1: Compute the ratio of gross profit to sales and the ratio of operating income to sales for each product.
REQUIREMENT 2: Write a brief (one-page) memo using the product profitability report and the calculations in (a) to make recommendations to management with respect to strategies for the three products.
ACCEPTABLE LENGTH
Submit a paper that is 1 page.
FORMATTING REQUIREMENTS
12-Point Times New Roman Font
Double Space Lines
Cite Used Sources If Applicable
