Johnson & Johnson (JNJ): Ethics and the Manager

Case assignment: Ethics and the Manager
The case assignment is a formal paper 5 - 8 pages long. There should
be a title page, the use of in-text citations, and a reference page. The
title page and reference page do not count in the 5 - 8 pages. The
paper should be APA formatted, double spaced, with 1-inch margins and 12 point Times New Roman font. A minimum of 5 academic references and 5 in-text citations are required.
Assignment:
You have three options:
Manufacturing
Service

Non-Profit
You will choose a company from any stock exchange, it may be
domestic New York Stock Exchange (NYSE) or foreign Tokyo Stock
Exchange (TSE). All companies listed on these stock exchanges are
publicly traded and the information you will need can be found on the
company’s website. This will include but not limited to financial
reports, annual reports, and investor reports. Information may be
found through other sources so please use all tools available to you.
When you have chosen which type of company you will do the
following:
1. Provide the name of the company and at least a one (1) page
history.
2. Identify the method of calculating cost for the company.
3. Determine if the cost method the company has chosen is most
appropriate and explain three (3) reasons why the method is
appropriate.
4. If you decide the cost method the company has chosen is not
appropriate, write a recommendation as if you are sending it to
the company for real and discuss three (3) reasons to support
your recommendation
5. Incorporate the concepts from Modules 1-4 you have learned in
class. You may use concepts that will learn about as well.
However, you MUST use the concepts that have been
presented thus far.
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CONCEPTS - MODULES 1-4
Module 1 Concepts:
1-Managerial accounting and the business environment
2-Managerial accounting and cost concepts

Managers carry out three major activities in an organization: planning, directing and motivating, and controlling. Planning involves establishing a basic strategy, selecting a course of action, and specifying how the action will be implemented. Directing and motivating involves mobilizing people to carry out plans and run routine operations. Controlling involves ensuring that the plan is actually carried out and is appropriately modified as circumstances change.
In contrast to financial accounting, managerial accounting: (1) focuses on the needs of managers rather than outsiders; (2) emphasizes decisions affecting the future rather than the financial consequences of past actions; (3) emphasizes relevance rather than objectivity and verifiability; (4) emphasizes timeliness rather than precision; (5) emphasizes the segments of an organization rather than summary data concerning the entire organization; (6) is not governed by GAAP; and (7) is not mandatory.
The three major elements of product costs in a manufacturing company are direct materials, direct labor, and manufacturing overhead.
The schedule of cost of goods manufactured lists the manufacturing costs that have been incurred during the period. These costs are organized under the three categories of direct materials, direct labor, and manufacturing overhead. The total costs incurred are adjusted for any change in the Work in Process inventory to determine the cost of goods manufactured (i.e. finished) during the period.
The schedule of cost of goods manufactured ties into the income statement through the cost of goods sold section. The cost of goods manufactured is added to the beginning Finished Goods inventory to determine the goods available for sale. In effect, the cost of goods manufactured takes the place of the Purchases account in a merchandising firm.
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Module 2 Concepts:
1-Systems design: Job-order costing
2-Systems design: Process costing

Job-order costing is used in situations where many different products or services are produced each period. Process costing is used in situations where a single, homogeneous product, such as cement, bricks, or gasoline, is produced for long periods.
A predetermined overhead rate is used to apply overhead cost to jobs. It is computed before a period begins by dividing the period’s estimated total manufacturing overhead by the period’s estimated total amount of the allocation base. Thereafter, overhead cost is applied to jobs by multiplying the predetermined overhead rate by the actual amount of the allocation base that is recorded for each job.
Cost accumulation is simpler under process costing because costs only need to be assigned to departments—not individual jobs. A company usually has a small number of processing departments, whereas a job-order costing system often must keep track of the costs of hundreds or even thousands of jobs.
In a process costing system, a Work in Process account is maintained for each processing department.
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Module 3 Concepts:
Cost-volume-profit relationships
Variable cost: The variable cost per unit is constant, but total variable cost changes in in direct proportion to changes in volume. Fixed cost: The total fixed cost is constant within the relevant range. The average fixed cost per unit varies inversely with changes in volume. Mixed cost: A mixed cost contains both variable and fixed cost elements.
An activity base is a measure of whatever causes the incurrence of a variable cost. Examples of activity bases include units produced, units sold, letters typed, beds in a hospital, meals served in a cafe, service calls made, etc.
The formula for a mixed cost is Y = a + bX. In cost analysis, the “a” term represents the fixed cost and the “b” term represents the variable cost per unit of activity.
The contribution approach income statement organizes costs by behavior, first deducting variable expenses to obtain contribution margin, and then deducting fixed expenses to obtain net operating income. The traditional approach organizes costs by function, such as production, selling, and administration. Within a functional area, fixed and variable costs are intermingled.
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Module 4 Concepts:
1-Variable costing: A tool for management
2- Performance Measurement in Decentralized Organizations
Absorption and variable costing differ in how they handle fixed manufacturing overhead. Under absorption costing, fixed overhead is treated as a product cost and hence is an asset until products are sold. Under variable costing, fixed manufacturing overhead is treated as a period cost and is expensed on
Under absorption costing, fixed manufacturing overhead costs are included in product costs, along with direct materials, direct labor, and variable manufacturing overhead. If some of the units are not sold by the end of the period, then they are carried into the next period as inventory. When the units are finally sold, the fixed manufacturing overhead cost that has been carried over with the units is included as part of that period’s cost of goods sold.
Absorption costing advocates argue that absorption costing does a better job of matching costs with revenues than variable costing. They argue that all manufacturing costs must be assigned to products to properly match the costs of producing units of product with the revenues from the units when they are sold. They believe that no distinction should be made between variable and fixed manufacturing costs for the purposes of matching costs and revenues.
Ideal standards assume perfection and do not allow for any inefficiency. Ideal standards are rarely, if ever, attained. Practical standards can be attained by employees working at a reasonable, though efficient pace and allow for normal breaks and work interruptions.
Under management by exception, managers focus their attention on results that deviate from expectations. It is assumed that results that meet expectations do not require investigation.
Separating an overall variance into a price variance and a quantity variance provides more information. Moreover, price and quantity variances are usually the responsibilities of different managers.

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