Calculation of Budgeted Contribution Margin for N Go

The present study is based on preparation of budgets for carrying N Go for the first quarter of 2019. Provided budgets will be supported by proper calculations and working for better understanding and presentation. On the basis of prepared budgets, total budgeted contribution margin has been computed. Next part of the study analyses actions of Erica and on the basis of analysis actions to be taken by marketing managers, production managers and division controlled on the basis to ethics to be applied for cost accounting. 

As per the given case situation, to attain the bonus Erika is planning to overestimate expenses and underestimate revenues to achieve the target required to receive a bonus. This behaviour is not ethical as the accuracy of information is compromised, and consequently, financial information will not show a true and fair view of the business. Deferring inventories to assure bonus in next year is also not justifiable as, without actual sales, revenues of business will be uplifted. The objective of bonus strategy is to ensure efficiency and performance of the business is improvised so that overall profitability can be increased (Otley, 2016). However, the actions of Erika are completely contrary to this as she is claiming for the bonus without enhancing the efficiency of the business. Actions of Erica also are in conflict with the interest of business and with this overall profitability will be suffered. 

Accounting professional and Ethical standards boards limited (APESB) has been developed in Australia to develop professional accounting standards to ensure ethics in the behaviour of the profession. By this regulatory body, APES 110 code of ethics has been issued to ensure that accountants and another related profession to this job post are working in the public interest (Langfield-Smith  et al. 2017). In the cited standard there are five primary principles related to the ethics which are as follows:

• Confidentiality
• Integrity
• Objectivity
• Professional competence and due care
• The professional behaviour.

By application of above-described principles, it can be said that professionals are required to honest while financial reporting and maintaining business relationships. Further, the actions taken by the accountant and professionals must not be biased and not to be influenced by unethical aspects or should lead to a conflict of interest (Wouters et al. 2018). This standard imposes an obligation on professionals to make use of professional judgment while following orders. Further, in a situation, if they identify any threat, then it should be either eliminated or to be reduced to the maximum possible extent.

Analysis of Erica’s Actions and Ethical Considerations for Marketing Managers, Production Managers, and Division Controller

Therefore, by considering the above-described provisions, as a marketing manager, I will report to seniors by describing the action of Erica. Justification of this action is to report the unethical behaviour of Erica. This approach might adversely affect my working relations with the Erica but the as a professional I have a responsibility towards the business and  APES 110 code of ethics also states that first priority is to be provided to the interest of the company to ensure sustainable growth. 

As a production manager, it is my responsibility to consider the interest of employees as well as companies. If I am aware of the fact that division managers are engaged in the padding of budgets, and it is common practices for them, then on the primary basis I will modify the bonus plan. I will apply the following factors in developing bonus plan:

Sales bonus simply refers to the receiving financial incentive at that when the seller meet up or surpluses that are pre-definite goals (Madhav, Horngren and Datar, 2015). It may be measured as a per cent of cumulative revenue milestone- i.e. a dollar amount is rewarded just the once a rep carries in a definite revenue amount for a specific period. For example, an individual rep may get a $1000 sales in a situation where they attain revenue of $10,000 for the quarter, but this is competent as seen in the present case. Therefore Bonuses are to be linked with the accomplishments, and it should not only be directly related to revenue. For instance, bonuses might be rewarded on the number of units that are sold, how many agreements are signed newly or how rapidly fresh customers are stirred towards the sales cycle.    

Improved communication inside an organization can help to increase productivity. While the information is received from one section to the other is done rapidly and correctly, then it can improvise the speed upon which the organization works and make sure that every required party receive the information that is required to be productive (Klychova et al. 2015). The production manager is accountable to ensure that the elements are necessary to assist efficient communication in an organization. For instance, the arrangements of enough computer accounting system, which computes the current inventory and pass this information to the manufacturing department so as to keep up the level of products for, fulfilling the orders.     

Production managers can also implement a training program for employees to enhance overall efficiency by making improvisation in methods and strategies used. For this, initially, production managers are required to analyse the work functions of operational managers so that appropriate steps can be taken to maximise productivity.

APES 110 Code of Ethics for Professional Accounting Standards

The whole point of offering sales bonuses or commissions is to incentivize the team to work towards the goals that matter most (Phibbs, Barnett and Fan, 2015). Sales bonus must be structured by considering specific objectives such as making an increase in cash flows, increase in departmental profits and it should be supported by scheduling a certain number of meetings to monitor the performance of division managers and their actions to attain the developed goals.

Apart from the above-described aspects, I will impose a penalty on the division managers engaged in unethical practices. This action is justified because it is a set an example for all division managers in the future not to get engaged in such practices. Further, the practice of regular feedbacks and recommendations from managers of all divisions will be implemented to take the viewpoint of all managers. This approach will ensure that managers will enhance overall efficiency without adopting unethical practices to earn a bonus in a fair manner.

(iv)

By considering the above-described code of ethics, if I will be in the position of division controller and get the command of accelerating the recognition of expenses which does not belong to a current financial year, then I will ask for justification for such accounting in writing. This approach will provide written evidence of the action of the division manager. Further, I will report to the department head about such instruction provided by the division manager so that the authority can take appropriate actions.

Conclusion

In accordance with the present study, the conclusion can be drawn that it is significant for the business to record cost in an accurate manner to make viable decisions for better growth and profitability of the business. Further, the study also shows the significance of ethics in cost accounting to ensure the overall accuracy of cost information. Analysis of the case study shows that the existing bonus plan is not viable due to which division managers such as Erica are engaged in unethical aspects. Therefore, businesses are required to adopt viable practices to improvise an overall bonus strategy and to attain business objectives in a sustainable manner. 

References

Klychova, G.S., Zakirova, A.R., Zakirov, Z.R. and Valieva, G.R., 2015. Management aspects of production cost accounting in horse breeding. Asian Social Science, 11(11), p.308.

Langfield-Smith, K., Smith, D., Andon, P., Hilton, R. and Thorne, H., 2017. Management Accounting: Information for creating and managing value. McGraw-Hill Education Australia.

Madhav, R., Horngren, C. and Datar, S., 2015. Cost Accounting: A Managerial Emphasis, 15. Auflage, Edinburgh.

Otley, D., 2016. The contingency theory of management accounting and control: 1980–2014. Management accounting research, 31, pp.45-62.

Phibbs, C.S., Barnett, P.B. and Fan, A., 2015. Research Guide to the Managerial Cost Accounting National Cost Extracts. Guidebook.

Wouters, M., Selto, F.H., Hilton, R.W. and Maher, M.W., 2018. T Course: Management Accounting 1 [T-WIWI-102800]. Module Handbook Industrial Engineering and Management (B. Sc.).