Reference no: EM132953047

Question - Merinda Wolfson is the CFO of the publicly traded company, Brown & Tatum Incorporated, a manufacturer of golf equipment. At the beginning of the year, Wolfson budgeted that the company's net earnings would grow by approximately 15% during the current fiscal year. Unfortunately, now in preparation for an upcoming annual shareholder meeting, Wolfson is projecting that due to the COVID pandemic, sales will be significantly less than expected for the year and that the company will not meet its earnings projections. Therefore, Wolfson has requested budget rollbacks and spending freezes for the remainder of the year. In addition, Wolfson has asked you, her accounting manager, to carefully scrutinize any costs that are currently classified as period costs to reclassify as much as possible to product costs, including shifting allocated costs to a higher percentage being allocated to the manufacturing process and facilities. The company is expected to have substantial inventories on hand at year-end.

As the accounting manager, prepare a two-page report (double spaced) to the CFO, responding to the following questions:

What is the difference in the accounting treatment and flow of costs for product costs and period costs?

Why would reclassifying or shifting period costs to product costs increase the fiscal year's net earnings? What, if any, impact would this have on the inventory costs on the balance sheet?

Recommend at least 5 specific expenses that could either be eliminated, reduced, or reclassified to product costs. Be creative but fully explain your decisions and their impact to the balance sheet and income statement.

Do you believe Wolfson's actions are ethical? Provide detailed reasoning for your position.