Benjamin Hall, an assistant Vice President at Fundamental Products, was disturbed to find on his desk...

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Benjamin Hall, an assistant Vice President at Fundamental Products, was disturbed to find on his desk a memo from his boss, Amal Viola, to the controller of the company. The memo appears below: FUNDAMENTAL PRODUCTS MEMO August 18 To: Aditya Singh, Controller Fm: Amal Viola, Executive Vice President As you know, we won't start recording many sales until October when stores start accepting shipments from us for the Christmas season. Meanwhile, we are producing flat-out and are building up our finished goods inventories so that we will be ready to ship next month. Unfortunately, we are in a bind right now since it looks like the net income for the quarter ending on August 31 is going to be pretty awful. This may get us in trouble with the bank since they always review the quarterly financial reports and may call in our loan if they don't like what they see. Is there any possibility that we could change the classification of some of our period costs to product costs-such as the rent on the finished goods warehouse? Please let me know as soon as possible. The President is pushing for results. Benjamin didn't know what to do about the memo. It wasn't intended for him, but its contents were alarming. Requirements Based on the above details, please complete the below requirements for a total grade of 15 marks (5%). 1. Why has Amal Viola suggested reclassifying some period costs as product costs? (11 marks total) a. Distinguish (define and explain the difference) between period and product costs by (4 marks) b. Explain how the impact of reclassifying periods costs as products costs on the financial statements (i.e., income statement and balance sheet). (2 marks) c. Would it benefit the company by reclassifying period costs as product costs? Explain (2 marks) Benjamin Hall, an assistant Vice President at Fundamental Products, was disturbed to find on his desk a memo from his boss, Amal Viola, to the controller of the company. The memo appears below: FUNDAMENTAL PRODUCTS MEMO August 18 To: Aditya Singh, Controller Fm: Amal Viola, Executive Vice President As you know, we won't start recording many sales until October when stores start accepting shipments from us for the Christmas season. Meanwhile, we are producing flat-out and are building up our finished goods inventories so that we will be ready to ship next month. Unfortunately, we are in a bind right now since it looks like the net income for the quarter ending on August 31 is going to be pretty awful. This may get us in trouble with the bank since they always review the quarterly financial reports and may call in our loan if they don't like what they see. Is there any possibility that we could change the classification of some of our period costs to product costs-such as the rent on the finished goods warehouse? Please let me know as soon as possible. The President is pushing for results. Benjamin didn't know what to do about the memo. It wasn't intended for him, but its contents were alarming. Requirements Based on the above details, please complete the below requirements for a total grade of 15 marks (5%). 1. Why has Amal Viola suggested reclassifying some period costs as product costs? (11 marks total) a. Distinguish (define and explain the difference) between period and product costs by (4 marks) b. Explain how the impact of reclassifying periods costs as products costs on the financial statements (i.e., income statement and balance sheet). (2 marks) c. Would it benefit the company by reclassifying period costs as product costs? Explain (2 marks)

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Answer product costs can improve the net income for the quarter ending on August 31 7 marks a Distinguishing between period and product costs Period C... View the full answer