Toastmasters application development

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Christopher Hansen

Professor Batchelder

11/16/2020

Software Requirement Specification Document for Toastmasters Toolbox System

Table of Contents

Preface ………………………………………………………………………………………………………………………………………. 3

Introduction ……………………………………………………………………………………………………………………………….. 3

Glossary ……………………………………………………………………………………………………………………………………… 4

User Requirements Definition ………………………………………………………………………………………………………. 5

Functional Requirements ………………………………………………………………………………………………………….. 5

Non-Functional Requirements …………………………………………………………………………………………………… 5

Use Case Diagram ……………………………………………………………………………………………………………………. 6

System Architecture …………………………………………………………………………………………………………………….. 7

Server and Host Application Logic Module ………………………………………………………………………………….. 7

Facial Expression Recognition Thread ……………………………………………………………………………………… 8

Web Server Hosting Thread …………………………………………………………………………………………………… 8

Speech Recognition Thread …………………………………………………………………………………………………… 9

Timer Thread ……………………………………………………………………………………………………………………….. 9

File I/O Methods ………………………………………………………………………………………………………………….. 9

Reporting Methods …………………………………………………………………………………………………………….. 10

Generic Application Methods ………………………………………………………………………………………………. 10

Server and Host Graphical User Interface Module ……………………………………………………………………… 10

Client Ah-Counter Application Logic Module …………………………………………………………………………….. 10

Client Ah-Counter Graphical User Interface Module …………………………………………………………………… 11

System Requirements Specification …………………………………………………………………………………………….. 12

Functional Requirements ………………………………………………………………………………………………………… 12

Non-functional Requirements …………………………………………………………………………………………………. 12

System Models ………………………………………………………………………………………………………………………….. 15

System Context Diagram …………………………………………………………………………………………………………. 15

Software System Context Diagram …………………………………………………………………………………………… 16

System Architecture Overview ………………………………………………………………………………………………… 17

System Evolution……………………………………………………………………………………………………………………….. 18

Appendix A Hardware Requirements ………………………………………………………………………………………… 19

Appendix B Diagrams ………………………………………………………………………………………………………………. 19

Preface

The software requirements specification document serves to provide information

pertaining to the requirements engineering, system architecture, system modeling, and system

design of the Toastmasters Toolbox system. The material focus of this document is for the

current developer and any future developer(s) to understand what has been or will be

implemented for this system. This is the second version of the software requirements

specification document, and incorporates details of the current system, as well as corrections

made to the document from the original revision.

Introduction

This system will serve as an aid in Toastmasters presentations. The system is called a

Toastmasters Toolbox and will fulfill many of the roles in a traditional Toastmasters meeting.

These roles include facial expression analysis, speech disfluency feedback, timing cue, provide

feedback on the speakers rate of speech, and will provide a report to the user at the end of the

speech. This system will be composed of a software system that runs on a single computer, or

PC. The system aims at helping the user improve their public speaking abilities in a stand-alone

manner. This is in line with the intention of Toastmasters.

Glossary

1. API: Application Programming Interface; computing interface which defines interactions

between multiple software intermediaries.

2. Emulation: reproduction of the function or action of a different computer, software

system, etc.

3. Graphical User Interface (GUI): a visual way of interacting with a computer using items

such as windows, icons, and menus, used by most modern operating systems.

4. Linux: open-source operating system.

5. Lubuntu: lightweight distribution of Ubuntu, a Linux operating system.

6. Module: a python file that contains a set of variables, functions, and/or classes.

7. Package: a namespace that can contain multiple packages and modules.

8. PC: Personal Computer

9. Processor: an electrical unit that executes instructions and computations

10. Real-time: the actual time during which a process or event occurs.

11. Software Architecture: fundamental structure of a software system

12. Virtual Machine: An emulation of a computer system.

User Requirements Definition

This system will fulfill multiple roles that are typically performed by a human observer

during a Toastmasters speech.

Functional Requirements
1. The system shall perform a real-time facial expression analysis of the current speaker.

2. The system shall provide speech disfluency feedback to the current speaker.

3. The system shall display timing cues to the current speaker that indicate how long the

speaker has spoken.

4. The system shall provide a report of the overall performance of the speaker once the

speech is done.

5. The system will provide real-time feedback on the rate of speech of the current speaker.

Non-Functional Requirements
1. The system shall be composed of software within a single PC as well as one external

device for the Ah-Counter.

2. The system should perform in real-time.

3. The system will utilize a virtual machine running a Lubuntu distribution of Linux hosted

on a Windows 10 operating system.

4. The software will be developed in a Linux environment running within the virtual

machine.

5. The system will utilize a Graphical User Interface to allow the users to provide input and

observe outputs from the system.

Use Case Diagram

Figure URD-1

System Architecture

The architecture of the system can be classified as a client-server layered architecture.

The system will be composed of four main modules. Each of the modules are contained within

their own respective file. In total, there are four files for each of the four modules. There are two

higher level modules for the two different GUIs for the server side of the system and the client

side of the system. These are called the Server and Host Graphical User Interface Module and

the Client Ah-Counter Graphical User Interface Module. These will allow the users to interact

with the system through an intuitive interface using a variety of methods provided by the GUIs.

The server and client will each have a lower-level, logic, and event driven module as well that

interact with each other and their respective GUIs. These are called the Server and Host

Application Logic Module and the Client Ah-Counter Application Logic Module. These modules

will utilize, and therefore have access to even lower-level, open-sourced modules that are

contained within external libraries that are included in the files. All included modules are

imported at the beginning of each file for their respective module. See the System Models

section for a graphical representation of the overview for the system architecture, Figure SM-3.

Server and Host Application Logic Module

The Server and Host Application Logic Module provides most of the functionality of the

Toastmasters Toolbox system. This module is contained within the python file Final_Project.py

and is the most processor intensive module. This module can be broken down into 7 main

sections. These sections provide the classes and methods that are used to fulfill a large portion of

the functional and non-functional requirements of the system. These 7 sections are composed of

4 threads that run simultaneously, as well as 3 additional sections that are comprised of methods

that are grouped according to their functionality. These sections are as follows: Facial Expression

Recognition Thread, Web Server Hosting Thread, Speech Recognition Thread, Timer Thread,

File Input/Output (I/O) Methods, Reporting Methods, and Generic Application Methods.

Facial Expression Recognition Thread

This thread utilizes the fer (Facial Expression Recognition) and Video modules from the

external FER package. This is an open-source software that utilizes a neural-engine to determine

what emotions a user is exhibiting by acquiring video from the webcam and processing the feed

to determine the facial expressions. This thread continuously loops and analyzes the expressions

by frame from the webcam. This thread also maintains output to the Server and Host GUI to

update the speaker on what emotion they are exhibiting, the magnitude of the emotion,

calculates and outputs the FPS (Frames-per-Second) counter to the Server and Host GUI, and

also allows the user to mirror the video feed based on if a QRadioButton widget is activated on

not on the Server and Host GUI. This thread begins running at the launch of the program and

will terminate once a user stops the speech. The thread can resume only if a user begins a speech

again, after stopping it.

Web Server Hosting Thread

This thread utilizes the flask module from the external open-source Flask package. The

thread is simple, simply hosting a simple web server. This section of code also routes to and runs

methods based on requests from the client. These methods include ways to update the GUI with

the current Ah-Count and play an audio file when the ah-counter dings the speaker, and also

allows the ah-counter to change the background color of the Ah-Counter label on both Server

and Client GUI Modules. This thread begins running at the launch of the program and will

terminate once a user stops the speech. The thread can resume only if a user begins a speech

again, after stopping it.

Speech Recognition Thread

This thread utilizes the pyaudio module from the PyAudio package, as well as the

speech_recognition module from the Speech Recognition package. This thread continuously

loops, gathering audio data from the microphone by utilizing the pyaudio module and its

functions, sends this audio data to Googles speech recognition API (application programming

interface) using the speech_recognition module, calculates the average words-per-minute, and

then outputs this to the Server and Host GUI Module. This thread also outputs a string of the

recognized audio to the Server and Host GUI, as well as the number of words that it recognized.

If this thread does not recognize any audio, it will output a corresponding message. This thread

begins running at the launch of the program and will terminate once a user stops the speech. The

thread can resume only if a user begins a speech again, after stopping it.

Timer Thread

This thread utilizes the internal time module. This thread begins once the user starts the

speech via the Server and Host GUI. The thread begins processing by receiving values for

different speech timer settings from the Server and Host GUI, and then begins a timer. Through

each loop, the thread determines if the speaker is within certain thresholds that were specified

earlier and outputs a background color to the Server and Host GUI that represents the timer flags.

The color corresponds to the threshold that has been met or surpassed. This thread ends once the

speaker reaches the end of the allotted speaking time.

File I/O Methods

This section is a grouping of two methods that can be called to either save the generated

report to a .txt file or import a report from an existing .txt file. The .txt file that is saved is always

Toastmaster Report.txt. If this file already exists, it will be overwritten. The import function

will import a file under the same Toastmaster Report.txt name and output the report to the

Server and Host GUI.

Reporting Methods

These methods provide ways to generate the report after the speaker is done and output it

to the Server and Host GUI, navigate to the report page on the GUI, or to cancel the report,

which just navigates to the previous page of the Server and Host GUI.

Generic Application Methods

This section contains methods to begin and stop the speech, to terminate all running

threads, to set the speech settings once the user clicks the Enter button on the first page of the

Server and Host GUI, and a function to quit the application when user exits the program.

Server and Host Graphical User Interface Module

This is the highest-level module that allows the speaker to interact with the system. It

allows the speaker to provide inputs in the form of button or key presses and provides outputs to

the user that it receives from the lower-level Server and Host Application Logic Module. This

module is composed of a single pyQt5 file called Final_Project.ui.

Client Ah-Counter Application Logic Module

This module is a lower-level module that takes in inputs from the Client Ah-Counter GUI

and provides outputs to the Client Ah-Counter GUI as well as the Server and Host Application

Logic Module via a network. This module is not processor intensive and runs one thread that

accesses the hosted web server, ran by the Server and Host Application Logic Module. The

module also contains functions that run when triggered by the event of the Ah-Counter clicking

one of the buttons. These functions execute simple logic functionality such as incrementing or

decrementing the ah counter and then request to post to an address of the webserver.

Client Ah-Counter Graphical User Interface Module

This is the highest-level module that allows the Ah-Counter to interact with the system. It

allows the Ah-Counter to provide inputs in the form of button presses and provides outputs to the

user that it receives from the lower-level Client Ah-Counter Application Logic Module. This

module is composed of a single pyQt5 file called flask_client.ui.

System Requirements Specification

Functional Requirements
1. The system shall output the real-time video of the speaker in the GUI. This is to mimic

the function of a mirror.

2. The system shall analyze the expressions of the speaker using the footage captured by the

webcam.

3. The system shall determine the mood of the speaker based on the expressions it analyzes.

Non-functional Requirements
1. The capture, analysis of expressions, and providing feedback shall all occur in real-time.

2. The system shall capture the audio of the speakers speech via a microphone.

3. The system shall parse through the speech in real-time.

4. The system shall output an audio signal and graphical signal through the GUIs when the

speaker uses a filler word such as uh or um.

5. The Ah-Counter shall use a device connected to the internet that allows them to ding the

speaker via a button when the speaker uses a filler word.

6. The Ah-Counters device shall communicate with the system via a webserver.

7. The webserver shall be hosted on the speakers machine.

8. The system shall keep track of how many times the Ah-Counter dings the speaker.

9. The system shall keep track of the number of filler words that it detects.

10. The system shall output a graphical signal that has a color that corresponds to the

appropriate time for the cue.

10.1 There shall be three different cues corresponding to three different times.

10.2 There shall be 3 different colors that correspond to the three different cues.

11. The user shall be able to configure the three different times that correspond to the cues.

12. The system will display a report that contains information about the speech as soon as the

speech is over.

12.1 The report shall display the amount of time that the speech took.

12.2 The report shall display the number of times the Ah-Counter dinged the speaker.

12.3 The report shall display the most used emotion by the speaker.

12.4 The report shall display the least used emotion by the speaker.

12.5 The report shall display the rate of speech of the speaker.

13. The speech ends when the speaker presses a stop button on the GUI, or when the speaker

runs out of time.

14. The system shall save the report to a .txt file.

15. The systems main program shall be executed in a virtual machine.

16. The virtual machine shall run Lubuntu.

17. The system shall allow an external device to connect to it via a webserver.

18. The external device shall communicate with the system via the webserver.

19. The systems latency, or the classification of real-time shall be less than 250

milliseconds.

20. The real-time feedback of the rate of speech tracker shall refresh the value every 5

seconds.

21. The virtual machine shall be hosted on a Windows 10 operating system.

22. The GUI shall output information to the speaker in real-time.

22.1 The GUI shall display the number of times the Ah-counter dinged the speaker.

22.2 The GUI shall display the current rate of speech.

22.3 The GUI shall display the current mood it perceives the speaker to have.

23. The GUI shall have buttons to start and stop the speech.

24. The GUI shall have a window for webcam feedback.

System Models

This chapter includes graphical system models showing the relationships between the

system components and the system and its environment.

System Context Diagram

Figure SM-1

Software System Context Diagram

Figure SM-2

System Architecture Overview

Figure SM-3

System Evolution

This describes the fundamental assumptions on which the system is based, and any

anticipated changes due to hardware evolution, changing user needs, and so on.

This system has been designed around a few hardware requirements and assumptions. I

assume the speakers computer has access to a webcam with a resolution of at least 400×300

pixels, a microphone, an internet connection, and at least two physical processing cores. The ah-

counters machine hardware requirements are even less; at least two physical processing cores

and an internet connection. Both machines need two processing cores because at least one core is

dedicated to the hosts operating system, and the second to the virtual machines operating

system. It would be preferable if the hosts machine had 4 or more cores so that they could

dedicate at least 2 to the virtual machine, due to the heavy processing nature of the Server and

Host Application Logic module.

Future design changes should consider limiting the number of threads required to run the

software, but enough to maintain core functionality of the system. The number of threads the

host machine should execute is proportional to the number of dedicated processing cores the

virtual machine has access to. Higher resolution webcams are welcome, but performance can

depreciate quickly depending on the resolution and processing power of the machine. If the host

machines processor can maintain required performance goals while the resolution of the

webcam is increased, facial expression recognition will be improved, as well as video feed

quality.

Appendix A Hardware Requirements

Hardware requirements define the minimal configurations for the system.

1. At least two physical processing cores on server/speaker and client/ah-counter machines.

2. Server machine must have a webcam with a minimum resolution of 400×300.

3. Server machine must have access to a webcam.

4. Server and client machines must have internet connection of at least 2 Mbps download

and 500 Kbps upload.

Appendix B Diagrams
Figure URD-1: Use Case Diagram to show how users will engage in the functionality of the

system.

Figure SM-1: System Context Diagram to show the boundaries and interactions of the entire

system, including hardware components.

Figure SM-2: Software System Context Diagram to show the boundaries and interactions of the

software system.

Figure SM-3: System Architecture Overview to show the fundamental structure of the software

system.

kindly have look to my request

Carl S. Warren
Professor Emeritus of Accounting

University of Georgia, Athens

William B. Tayler
Brigham Young University

Managerial
Accounting 15e

Australia Brazil Mexico Singapore United Kingdom United States

12020_fm_ptg01_i-xxi.indd 1 8/25/18 11:30 AM

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Managerial Accounting, 15e
Carl S. Warren
William B. Tayler

Senior Vice President, Higher Ed Product,
Content, and Market Development: Erin Joyner

Product Director: Jason Fremder

Product Manager: Matt Filimonov

Sr. Content Manager: Diane Bowdler

Product Assistant: Aiyana Moore

Executive Marketing Manager: Nathan Anderson

Production Service: Lumina Datamatics, Inc.

Designer: Chris Doughman

Cover and Internal Design: Ke Design

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Intellectual Property Analyst: Reba Frederics

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Printed in the United States of America
Print Number: 01 Print Year: 2018

12020_fm_ptg01_i-xxi.indd 2 28/08/18 7:54 AM

iii

Roadmap for Success
Warren/Tayler Managerial Accounting, 15e, provides a sound pedagogy for giving students a solid
foundation in managerial accounting. Warren/Tayler covers the fundamentals AND motivates stu-
dents to learn by showing how accounting is important to businesses.

Warren/Tayler is successful because it reaches students with a combination of new and tried-and-
tested pedagogy.

This revision includes a range of new and existing features that help Warren/Tayler provide
students with the context to see how accounting is valuable to business. These include:

New! Make a Decision section
New! Pathways Challenge
New! Certified Management Accountant (CMA) Examination Questions

Warren/Tayler also includes a thorough grounding in the fundamentals that any business student
will need to be successful. These key features include:

Presentation style designed around the way students learn
Updated schema
At the start of each chapter, a schema, or roadmap, shows students what they are going to

learn and how it is connected to the larger picture. The schema illustrates how the chapter
content lays the foundation with managerial concepts and principles. Then it moves students
through developing the information and ultimately into evaluating and analyzing information
in order to make decisions.

Statement
of Cash Flows15C

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ap

te
r

Financial
accounting

Managerial
accounting

Chapter 15

Statement
of Cash Flows

Chapter 16
Financial Statement

Analysis

Chapter 1 Introduction to Managerial Accounting
Principles

Developing Information

Decision Making

COST SYSTEMS

PLANNING AND EVALUATING TOOLS

COST ALLOCATIONS

STRATEGIC TOOLS

Chapter 2 Job Order Costing

Chapter 3 Process Costing

Chapter 4 Activity-Based Costing

Chapter 6 Cost-Volume-Profit Analysis

Chapter 7 Variable Costing

Chapter 8 Budgeting Systems

Chapter 9 Standard Costing and Variances

Chapter 10 Decentralized Operations

Chapter 11 Differential Analysis

Chapter 5 Support Departments

Chapter 5 Joint Costs

Chapter 12 Capital Investment Analysis

Chapter 13 Lean Manufacturing

Chapter 13 Activity Analysis

Chapter 14 The Balanced Scorecard

Chapter 14 Corporate Social Responsibility

698

12020_ch15_rev02_698-757.indd 698 8/4/18 11:45 AM

Preface

12020_fm_ptg01_i-xxi.indd 3 8/25/18 11:31 AM

Prefaceiv

Link to the opening company of each chapter calls out examples of how the concepts
introduced in the chapter are connected to the opening company. This shows how account-
ing is used in the real world by real companies.

303

A ssume that you have three different options for a summer job.
How would you evaluate these options? Naturally there are

many things to consider, including how much you could earn from
each job.

Determining how much you could earn from each job may
not be as simple as comparing the wage rate per hour. For exam-
ple, a job as an office clerk at a local company pays $8 per hour. A
job delivering pizza pays $10 per hour (including estimated tips),
although you must use your own transportation. Another job work-
ing in a beach resort over 500 miles away from your home pays $8
per hour. All three jobs offer 40 hours per week for the whole sum-
mer. If these options were ranked according to their pay per hour,
the pizza delivery job would be the most attractive. However, the
costs associated with each job must also be evaluated. For exam-
ple, the office job may require that you pay for downtown park-
ing and purchase office clothes. The pizza delivery job will require
you to pay for gas and maintenance for your car. The resort job will
require you to move to the resort city and incur additional living
costs. Only by considering the costs for each job will you be able to
determine which job will provide you with the most income.

Just as you should evaluate the relative income of various
choices, a business also evaluates the income earned from its
choices. Important choices include the products offered and the
geographical regions to be served.

A company will often evaluate the profitability of products
and regions. For example, Adobe Systems Inc. (ADBE),
one of the largest software companies in the world, determines
the income earned from its various product lines, such as Acrobat,
Photoshop, Premiere, and Dreamweaver software. Adobe uses
this information to establish product line pricing, as well as sales,
support, and development effort. Likewise, Adobe evaluates the
income earned in the geographic regions it serves, such as the
United States, Europe, and Asia. Again, such information aids man-
agement in managing revenue and expenses within the regions.

In this chapter, how businesses measure profitability using
absorption costing and variable costing is discussed. After illustrat-
ing and comparing these concepts, how businesses use them for
controlling costs, pricing products, planning production, analyzing
market segments, and analyzing contribution margins is described
and illustrated.

Adobe Systems Inc.

Pe
te

J
en

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n

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A

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y
st

o
ck

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Link to Adobe Systems . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Pages 305, 309, 312, 316, 319

12020_ch07_ptg01_302-351.indd 303 7/12/18 12:15 PM

312 Chapter 7 Variable Costing for Management Analysis

The $80,000 increase in operating income under Proposal 2 is caused by the allocation of the
fixed manufacturing costs of $400,000 over a greater number of units manufactured. Specifically,
an increase in production from 20,000 units to 25,000 units means that the fixed manufacturing
cost per unit decreases from $20 ($400,000 20,000 units) to $16 ($400,000 25,000 units). Thus,
the cost of goods sold when 25,000 units are manufactured is $4 per unit less, or $80,000 less in
total (20,000 units sold $4). Since the cost of goods sold is less, operating income is $80,000
more when 25,000 units rather than 20,000 units are manufactured.

Managers should be careful in analyzing operating income under absorption costing when fin-
ished goods inventory changes. Increases in operating income may be created by simply increas-
ing finished goods inventory. Thus, managers could misinterpret such increases (ordecreases) in
operating income as due to changes in sales volume, prices, or costs.

In a recent absorption costing income statement, Adobe Systems reported (in millions) total revenue
of $5,854, cost of revenue of $820, gross profit of $5,034, operating expenses of $3,541, and operating
income of $1,493.

Link to
Adobe Systems

Under variable costing, operating income is $200,000, regardless of whether 20,000 units or
25,000 units are manufactured. This is because no fixed manufacturing costs are allocated to the
units manufactured. Instead, all fixed manufacturing costs are treated as a period expense.

To illustrate, Exhibit 8 shows the variable costing income statements for Frand for the
production of 20,000 units, 25,000 units, and 30,000 units. In each case, the operating income
is $200,000.

Frand Manufacturing Company
Variable Costing Income Statements

20,000 Units
Manufactured

25,000 Units
Manufactured

30,000 Units
Manufactured

Sales (20,000 units $75) . . . . . . . . . . . . . . . . $1,500,000 $1,500,000 $ 1,500,000
Variable cost of goods sold:

Variable cost of goods manufactured:
(20,000 units $35) . . . . . . . . . . . . . . . $ (700,000)
(25,000 units $35) . . . . . . . . . . . . . . . $ (875,000)
(30,000 units $35) . . . . . . . . . . . . . . . $(1,050,000)

Ending inventory:
(0 units $35) . . . . . . . . . . . . . . . . . . . . 0
(5,000 units $35) . . . . . . . . . . . . . . . . 175,000
(10,000 units $35) . . . . . . . . . . . . . . . 350,000

Total variable cost of goods sold . . . . . . $ (700,000) $ (700,000) $ (700,000)
Manufacturing margin. . . . . . . . . . . . . . . . . . . $ 800,000 $ 800,000 $ 800,000
Variable selling and administrative

expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . (100,000) (100,000) (100,000)
Contribution margin. . . . . . . . . . . . . . . . . . . . . $ 700,000 $ 700,000 $ 700,000
Fixed costs:

Fixed manufacturing costs . . . . . . . . . . . $ (400,000) $ (400,000) $ (400,000)
Fixed selling and administrative

expenses . . . . . . . . . . . . . . . . . . . . . . . . . (100,000) (100,000) (100,000)
Total fixed costs . . . . . . . . . . . . . . . . . . . . . . $ (500,000) $ (500,000) $ (500,000)

Operating income . . . . . . . . . . . . . . . . . . . . . . . $ 200,000 $ 200,000 $ 200,000

Exhibit 8
Variable Costing
Income Statements
for Three Production
Levels

12020_ch07_ptg01_302-351.indd 312 7/12/18 12:15 PM

To aid comprehension and to demonstrate the impact of transactions, journal entries include
the net effect of the transaction on the accounting equation.

52 Chapter 2 Job Order Costing

no discrepancies, a journal entry is made to record the purchase. The journal entry to record the
suppliers invoice related to Receiving Report No. 196 in Exhibit 4 is as follows:

a. Materials 10,500
Accounts Payable 10,500

Materials purchased during December.

The storeroom releases materials for use in manufacturing when a materials requisition is
received. Examples of materials requisitions are shown in Exhibit 4.

The materials requisitions for each job serve as the basis for recording materials used. For direct
materials, the quantities and amounts from the materials requisitions are posted to job cost sheets. Job
cost sheets, which are also illustrated in Exhibit 4, make up the work in process subsidiary ledger.

Exhibit 4 shows the posting of $2,000 of direct materials to Job 71 and $11,000 of direct
materials to Job 72.2 Job 71 is an order for 20 units of Jazz Series guitars, while Job 72 is an order
for 60 units of American Series guitars.

A summary of the materials requisitions is used as a basis for the journal entry recording the
materials used for the month. For direct materials, this entry increases (debits) Work in Process and
decreases (credits) Materials as follows:

b. Work in Process 13,000
Materials 13,000

Materials requisitioned to jobs
($2,000 + $11,000).

Many companies use computerized information processes to record the use of materials. In
such cases, storeroom employees electronically record the release of materials, which automati-
cally updates the materials ledger and job cost sheets.

A 5 L 1 E
1 1

A 5 L 1 E
1 2

Ethics: Do It!
Phony Invoice Scams
A popular method for defrauding a company is to issue a
phony invoice. The scam begins by initially contacting the
target firm to discover details of key business contacts,
business operations, and products. The swindler then uses

this information to create a fictitious invoice. The invoice
will include names, figures, and other details to give it the
appearance of legitimacy. This type of scam can be avoided
if invoices are matched with receiving documents prior to
issuing a check.

2 To simplify, Exhibit 4 and this chapter use the first-in, first-out cost flow method.

Factory Labor
When employees report for work, they may use electronic badges, clock cards, or in-and-out
cards to clock in. When employees work on an individual job, they use time tickets to record the
amount of time they have worked on a specific job. Exhibit 5 illustrates time tickets for Jobs 71 and
72 at Legend Guitars.

Exhibit 5 shows that on December 13, 20Y8, D. McInnis spent six hours working on Job 71
at an hourly rate of $10 for a cost of $60 (6 hrs. $10). Exhibit 5 also indicates that a total of
350 hours was spent by employees on Job 71 during December for a total cost of $3,500. This total
direct labor cost of $3,500 is posted to the job cost sheet for Job 71, as shown in Exhibit 5.

Likewise, Exhibit 5 shows that on December 26, 20Y8, S. Andrews spent eight hours on Job 72 at an
hourly rate of $15 for a cost of $120 (8 hrs. $15). A total of 500 hours was spent by employees on Job
72 during December for a total cost of $7,500. This total direct labor cost of $7,500 is posted to the job
cost sheet for Job 72, as shown in Exhibit 5.

ETHICS

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Preface v

Located in each chapter, Why It Matters shows students how accounting is important
to businesses with which they are familiar. A Concept Clip icon indicates which Why It
Matters features have an accompanying concept clip video in CNOWv2.

CONCEPT CL IP

476 Chapter 10 Evaluating Decentralized Operations

Residual Income
Residual income is useful in overcoming some of the disadvantages of the return on investment.
Residual income is the excess of operating income over a minimum acceptable operating income,
as shown in Exhibit 7.

Exhibit 7

Residual Income
Operating income $ XXX
Minimum acceptable operating income as a

percent of invested assets (XXX)
Residual income $ XXX

The minimum acceptable operating income is computed by multiplying the company minimum
return on investment by the invested assets. The minimum rate is set by top management, based
on such factors as the cost of financing.

To illustrate, assume that DataLink Inc. has established 10% as the minimum acceptable return
on investment for divisional assets. The residual incomes for the three divisions are shown in
Exhibit 8.

Exhibit 8

Residual Income
DataLink, Inc.

Northern Division Central Division Southern Division

Operating income $ 70,000 $ 84,000 $ 75,000
Minimum acceptable operating income
as a percent of invested assets:

$350,000 10% (35,000)
$700,000 10% (70,000)
$500,000 10% (50,000)

Residual income $ 35,000 $ 14,000 $ 25,000

Coca-Cola Company: Go West Young Man

A major decision early in the history of Coca-Cola (KO) was to ex-
pand outside of the United States to the rest of the world. As a result,
Coca-Cola is known today the world over. What is revealing is how

this decision has impacted the revenues and profitability of Coca- Cola across
its international and North American segments. The following table shows
the percent of revenues and percent of operating income from the interna-
tional and North American geographic segments.

Revenues
Operating

Income

International segments 58.4% 65.6%
North American segment 41.6 34.4
Total 100% 100%

The first column shows that the international segments provide
over 58% of the revenues, while North America provides almost
42% of the revenues. However, the operating income tells a

different story. More than 65% of Coca- Colas profitability comes
from international segments. Given the revenue segmentation,
this suggests that the international profit margins must be higher
than the North American profit margin. Indeed this is the case, as
can be seen in the following table:

Profit Margin

International average 48.4%
North America 24.2%

The average profit margin for all the international segments is
two times as large as the North American segment. These results
reflect the heart of the Coca-Cola marketing strategy. In interna-
tional markets, Coca-Cola is able to charge relatively higher prices
due to high demand and less competition as compared to the North
American market.

Source: The Coca-Cola Company, Form 10-K for the Fiscal Year Ended December 31, 2017.

Why It Matters
CONCEPT CL IP

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314 Chapter 7 Variable Costing for Management Analysis

This is Accounting!
Economic Activity
Absorption costing is required by generally accepted accounting principles (GAAP) for reporting to exter-
nal stakeholders. Thus, auto manufacturers like Ford Motor Company (F) and General Motors
Company (GM) use absorption costing in preparing their financial statements. Under absorption costing,
fixed manufacturing costs are included in inventory. Thus, the more cars the auto companies make, the lower
the fixed cost per car and the smaller the cost of goods sold. In the years preceding the U.S. financial crisis and
economic downturn of 2008, Ford and General Motors produced more cars than were sold to customers.1

Critical Thinking/Judgment
If Ford and General Motors have high fixed costs and low variable costs, how would producing more cars
affect their operating income under absorption costing? under variable costing?
If absorption costing allows companies like Ford and General Motors to change their operating income by
increasing or decreasing production, why does GAAP require absorption costing?

Toastmasters application development

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