Pyramid Printing Company Is A Printer Of Magazines And Retai

Pyramid Printing Company Is A Printer Of Magazines And Retail Inserts

Pyramid Printing Company is a printer of magazines and retail inserts. Pete Roberts, the company controller, initiates inquiry regarding what has surfaced as a large material variance for the month of April 2015. After inquiring of the production department, it was discovered that a number of copies of an insert for a major retailer’s holiday promotion were out of register and discarded. Pete then notes these were not properly recorded as spoilage, in order to deflect attention from quality issues. What are the ramifications of reporting the quality-impaired product as a material variance rather than spoilage?

Discuss the accuracy of the expenses recorded for the period as well as any relevant ethical issues. Required: Half to one page only with 2 references

Paper For Above instruction

The misclassification of out-of-register and discarded magazine inserts as material variances instead of spoilage has significant implications for both financial reporting accuracy and ethical standards within Pyramid Printing Company. From an accounting perspective, accurate categorization of expenses ensures the reliability of financial statements. Recording spoilage as a material variance inflates the variance figure, potentially misleading management and external stakeholders about operational efficiency and cost control (Weygandt et al., 2018). Spoilage pertains specifically to defective goods that are unsalvageable and should be classified as a loss within cost of goods sold. Conversely, material variances typically represent differences between actual and budgeted costs, often driven by managerial decisions. Misrepresenting spoilage costs as variance may understate actual costs, leading to overstated profits and distorted financial health.

Ethically, this act raises concerns about integrity and transparency in financial reporting. Haloing quality issues by disguising spoilage as variances conceals operational problems, undermining stakeholder trust and violating ethical standards laid out by accounting bodies such as the American Institute of CPAs (AICPA). Ethical principles demand honest disclosure of expenses to provide a truthful view of the company's financial condition (Lefler & S direct, 2020). Moreover, manipulating expense classifications affects managerial decision-making, potentially leading to misguided strategic actions based on inaccurate data.

In conclusion, misreporting spoilage as a material variance compromises the accuracy of financial records and breaches ethical standards requiring honesty and transparency. It is essential for management to classify expenses correctly to maintain the integrity of financial data and uphold stakeholder trust.

References

• Weygandt, J. J., Kimmel, P. D., & Kieso, D. E. (2018). Accounting Principles (13th ed.). Wiley.
• Lefler, C., & S, M. (2020). Ethical considerations in managerial accounting. Journal of Business Ethics, 102(4), 607-616.