Accordingly, Gallant has ordered that wherever possible, expenditures should be postponed to the new year – including canceling or postponing orders with suppliers, delaying planned maintenance and training, and cutting back on end-of-the-year advertising and travel. Additionally, Gallant ordered the company’s controller to carefully scrutinize all costs that are currently classified as period costs and reclassify as many as possible as product costs. The company is expected to have substantial inventories of work in process and finished goods at the end of the year.
Comment on the following questions. Respond to at least two of your fellow students’ postings. * Why would reclassifying period costs as product costs increase this period’s reported earnings? •Do you believe Gallant’s actions are ethical? Why or why not? why would reclassifying period costs as product costs increase this period’s reported earnings? Do you believe Gallant’s actions are ethical? Why or why not? * Ethics – bobpursley, Thursday, November 11, 2010 at 2:07pm
If they are product costs, they could be carried on the books until the product is sold, making a short term “reduction” in costs. Ethical? It is smoke and mirrors, it is legal, and it does hide costs that ultimately will need to be paid. If I were the accounting firm certifying the balance sheet, it would be worthy of an accounting note on the statement. * Ethics/business – sarah, Saturday, April 23, 2011 at 1:31pm Period costs are administrative and advertising expenses, and thus they are not part of the cost of either purchased or manufactured costs (i. . product costs) (Noreen, Brewer, & Garrison, 2011).
The Term Paper on Project On " Arvind Mill" ( The Product Mix And Its Strategy)
PROJECT ON “ARVIND MILL (THE PRODUCT MIX AND ITS STRATEGY)” Master of Commerce Semester-I (2013-2014) Submitted In Partial Fulfillment of the requirements For the award of degree of M.Com-I By Suraj Shridhar Tripathi Seat No: _______ Tolani College of Commerce Sher-e-Punjab society, Andheri (East), Mumbai-400 093 PROJECT ON “ARVIND MILL (THE PRODUCT MIX AND ITS STRATEGY)” Master of Commerce ...
Product costs are costs directly involved in acquiring or making a product, such as costs associated with labor, manufacturing overheads, and materials (Noreen, Brewer, & Garrison, 2011).
Reclassifying period costs as product costs allows the company to show in their financial statement that they are putting more money into product, and therefore, until the product is sold the company do not have to show it as expenses.
Unlike period costs, which appear on the income statement as expenses in the period they incur, product costs are assigned to an inventory account on the balance sheet (Noreen, Brewer, & Garrison, 2011).
In my opinion, Kranbrack Corporation is basically falsifying their financial statement, which is unethical. Yes, the company has all the finished products in the inventory and once they sell the product, the expenses will get recorded, however they should consider that next year their expenses will be even higher.
