Week 6 Acct 505

RE: Case 12-32 | Deangela Dixon | 12/2/2012 7:36:32 AM |

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| Modified:12/2/2012 7:38 AM |

| 1. The decision being considered here is whether to continue operations at Ashton. The only relevant costs are the future facility costs that would be affected by this decision. If the facility were shut down, the Ashton facility has no resale value. In addition, if the Ashton facility were sold, the company would have to rent additional space at the remaining processing centers. There is no real cost at this point of using the Ashton facility despite what the financial performance report indicates. Therefore, it might be a better idea to consider shutting down the other facilities since the rent on those facilities might be avoided.The relevant costs and other variables that should be considered in this decision are:

Increase in rent at Pocatello and Idaho Falls $400,000

Decrease in local administrative expenses (60,000)

Net increase in costs $340,000

There would be costs of moving the equipment from Ashton and there might be some loss of revenues due to disruption of services. In sum, closing down the Ashton facility will almost certainly lead to a decline in FSC’s profits. Even though closing down the Ashton facility would result in a decline in overall company profits, it would result in an improved performance report for the Great Basin Region (ignoring the costs of moving equipment and potential loss of revenues from disruption of service to customers). |

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| 12 - 32 | Deangela Dixon | 12/3/2012 7:28:37 AM |

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| 2. If the Ashton facility is shut down, FSC’s profits will decline, employees will lose their jobs, and customers will at least temporarily suffer some decline in service. Therefore, Braun is willing to sacrifice the interests of the company, its employees, and its customers just to make his performance report look better. The Standards of Ethical Conduct for Management Accountants still provide useful guidelines. By...