Hanson, Inc. requires its marketing managers to submit estimated cost-volume-profit data on all requests for new products, or expansions of a product line. Nancy Stephens is a new manager. Her calculations show a fixed cost for a new project at $100,000 and a variable cost of $5. Since the selling price is only $15 for the proposed product, 10,000 units would need to be sold to break-even. That is approximately twice the volume estimate for the first year. She shares her dismay with Patti Patterson, another manager, Patti strongly advises her to revise her estimates. She points out that several of the costs that had been classified as fixed costs could be considered variable since they are step costs and mixed costs. When the data has been revised classifying those costs as variable costs, the project appears viable. a. Who are the stakeholders in this decision?b. Is it ethical for Nancy to revise the costs as indicate? Briefly explain. c. What should Nancy do?

Following are the responses to the given points:

Explanation:

For point a:

Following are the two categories of stakeholders:

For point b:

Fixed expenses do not represent an essential task. Rather, they involve costs related to the sale or the administration costs of a company. These expenses are charged in the way they receive place. All direct material, direct labor, or overheads related to the production of the product or service were variable expenses. If an item is not sold, those costs were documented throughout the inventory of the company or reported as an asset in the balance sheet. The reclassification from fixed into variable costs will shift the expenses from the financial statement expense to the portion of the stock in hand, and will thus increase profit. Thus, Nancy also isn't planning to classify those costs though they will delay these charges in order to manipulate their accounts to achieve their goals.

For point c:

I will analyze these "mix expenses" to assess fixed, semi-fixed and changeable elements. Evaluate additional semi-fixed costs then draw variable costs from them. Which would give me only variable costs, with fixed costs remaining. That's both quite fair and ethical.

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