ACCT $201$

Management Decision Making Case Study

You have recently been hired as the Controller for a large publicly traded company that has experienced significant operating losses for the past few years, which has caused a sharp decline in the company's stock price. The CFO has asked you to prepare a $2-3$ page $($double spaced$)$ analysis discussing the following topics $-$ fully explain your responses with details and substance:

The company is anticipating purchases of significant property and equipm ent during the next $12$ months. What are your considerations and recommendations on whether to use either straight$-$line depreciation method or the double$-$declining$-$balance depreciation method? In addition, the CFO has requested that all equipment, that generally needs to be replaced every $8-10$ years, be depreciated over $20$ years. What impact would that have on the Company's financial position? Are there any ethical concerns with this policy? What would you recommend?

What are your considerations and recommendation on whether to use either the LIFO or FIFO method for costing its inventory and what impact would that have on the Company's financial position? Name two specific ways that a company could improve its inventory turnover including whether those would have a positive or negative impact on the company's overall profitability.

The company has adopted the policy that all customer deposits received in advance of delivery are recorded as earned revenue on the day of cash receipt. In addition, the Company has ceased recording any allowance for doubtful accounts until any uncollectible receivables are fully written$-$off. Are there any ethical concerns with these policies? What would you recommend?

Currently, management focuses solely on gross profit in dollars rather than the gross profit margin percentage. Which is the more useful metric and explain why. What factors, beyond internal operational decisions, most influence gross profit margin? Identify and elaborate on two specific strategies that management can implement to improve gross profit margin.