Managerial Accounting Scenario 1 The manager of a fabric store has noticed a con

Question

Managerial Accounting Scenario 1

The manager of a fabric store has noticed a considerable increase in the amount of defective fabric being scrapped by his store. Clerks notice the defects (such as irregularities in the weave or color of fabric) when they cut yardage from bolts of fabric. These defects usually affect only a small portion of the fabric on a bolt. Therefore, when a clerk discovers a defect, the “bad spot” is cut from the bolt. The clerk fills out a defect slip, which includes the amount of defective fabric (in yards), the retail price per yard, and the inventory control number. The defect slip is attached to the fabric and put in a “defects” bin in the storeroom. Once a month, the assistant manager sends the defect slips to the accounting department and packages the bad fabric for sale as scrap material. The accounting department uses the defect slips to write off the defective inventory in the accounting records.

What information could the manager request from the management accounting department that might help in attacking the problem of increasing defects?

Explanation / Answer

The manager may request following information from management accounting department which may help attacking the problem of increasing defects :

(1) Colour of the defective fabrics,

(2) Weaving part of the defective fabrics,

(3) The amount of write off on each defective fabric.

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