Prepare a brief report in the form of a memo, to Delancy owner Angela Su, providing the following:
Explain to owner what is the main problem? **
What impact would shaving 5% off the estimated direct labour-hours in the base of the predetermined overhead rate have on financial statements? (consider Manufacturing overhead, working in process, Finishing Goods, Cost Of Good Sold, etc)
a. During the year?
b. At the end of the year?
Include in your report a discussion about the following: Assuming the company stakeholders are investors, creditors, tax authority, employees, insurers – how are they impacted by PDOR manipulation?
What is your recommendation to reduce yearend impact of cogs adjustment?
Be ready to present an ‘Elevator pitch’ or a quick summary of your analysis.