As the treasurer, it is your responsibility to ensure that the company's financial

statements and tax returns are accurate and comply with applicable laws and
regulations. Allocating underapplied overhead to different accounts in a way that does
not reflect the actual usage of overhead expenses is not appropriate and may lead to
inaccurate financial statements and tax returns. The assistant treasurer's suggestion to
allocate the entire amount to Cost of Goods Sold to reduce taxes is not a proper
accounting practice and could result in penalties and interest if discovered by the tax
authorities.

Therefore, you should respond by instructing the controller to review the allocation of
underapplied overhead and make adjustments that accurately reflect the actual usage of
overhead expenses. If the underapplied overhead cannot be allocated to specific
products, it should be recognized as a period expense and charged to the income
statement in the current period. It is important to ensure that the financial statements
and tax returns are accurate and comply with accounting and tax regulations. Trying to
manipulate the allocation of expenses to reduce taxes is not an appropriate practice and
could have serious consequences for the company.

As the treasurer of ABI, Inc., it is important to prioritize ethical and legal considerations when
supervising the preparation of the company's tax returns. Allocating a material amount of underapplied
overhead to the Cost of Goods Sold account solely for tax benefits would be unethical and potentially
illegal.

It is important to follow the generally accepted accounting principles (GAAP) when allocating
underapplied overhead. Allocating underapplied overhead to Work in Process Inventory, Finished Goods
Inventory, and Cost of Goods Sold accounts should be based on the proportional usage of overhead in
each account.

It is also important to avoid intentionally reducing profits solely to lower taxes. The IRS may view such
actions as tax evasion, which is illegal. It is the duty of the treasurer to ensure that the company's tax
returns accurately reflect the financial position of the company.

Therefore, as the treasurer of ABI, Inc., you should advise against assigning the entire amount of
underapplied overhead to the Cost of Goods Sold account without a proper basis for allocation. It would
be advisable to seek advice from a certified public accountant to ensure the company is in compliance
with GAAP and tax laws.