Explore BrainMass

Describe at least two method of costing employed

Describe at least two method of costing employed by the Tyco International. (If you are unable to locate specific information on-line, feel free to infer, as long as you discuss the approach in sufficient detail). Was this approach adequate, or did it contribute in any way to the firm's subsequent problems (financial scandal)?

© BrainMass Inc. brainmass.com July 16, 2018, 10:07 pm ad1c9bdddf

Solution Preview

Brief summary of the firm's problem in 2002:

I reviewed the 2002 Financial Statements as that was the year that the SEC asserted fraud against the management for taking out excessive loans at low rates and trading them as bonuses without authorization. The managers sold millions of dollars of stock and this was fraud since they didn't disclose their very large unauthorized loans to the public prior to the trades.

I attached the 2002 annual report.

Two methods of costing that Tyco used (or could have used), are job costing and process costing.

From this excerpt (page 7 of 2002 annual report) I infer that they use job costing for their fire protection system product:

"We install fire protection systems in both new and existing structures. Our fire protection systems
are purchased by owners, architects, construction engineers and mechanical or ...

Solution Summary

Your response is 519 words, including quotes from the annual report, showing that they likely used job costing and process costing. The 2002 fraud and whether this was due to the costing practices is discussed.