Bill Lewis, manager of the Thomas Electronics Division, called a meeting with his controller, Brindon Peterson, CMA, and his marketing manager, Patty Fritz. The following is a tran¬

script of the conversation that took place during the meeting.

BILL: Brindon, the variable costing system that you developed has proved to be a big plus for our division. Our success in winning bids has increased, and as a result, our revenues have increased by 25 percent. However, if we intend to meet this year's profit targets, we are going to need something extra—am I not right, Patty?

PATTY: Absolutely. While we have been able to win more bids, we still are losing too many, particularly to our major competitor, Kilborn Electronics. If I knew more about their bid¬

ding strategy, I imagine we could be more successful competing with them.

BILL: Would knowing their variable costs help?

PATTY: Certainly. It would give me their minimum price. With that knowledge, I'm sure we could find a way to beat them on several jobs, particularly on those jobs where we are at least as efficient. It would also help us identify where we are not cost competitive. With this information, we might be able to find ways to increase our efficiency.

BILL: Well, I have good news. I have some data here in these handouts that reveal bids that Kilborn made on several jobs. I have also been able to obtain the direct labor hours worked for many of these jobs. But that's not all. I hav'e monthly totals for manufacturing costs and direct labor hours for all jobs for the past ten months. Brindon, with this infor¬

mation, can you estimate what the variable manufacturing cost per hour is? If you can, we can compute the variable costs for each job and the markup that Kilborn is using.

BRINDON: Yes, an analysis of the data you're requesting is possible. 1 have a question, though, before I do this. How did you manage to acquire these data? I can't imagine that Kilborn would willingly release this information.

BILL: What does it matter how the data were acquired? The fact is, we have them, and we hav'e an opportunity to gain a tremendous competitive advantage. With that advantage, we can meet our profit targets, and we will all end the year with a big bonus.

After the meeting, in a conversation with Patty, Brindon learned that Bill was dating Jackie Wilson, a cost accountant (and CMA) who happened to work for Kilborn. Patty speculated that Jackie might be the source of the Kilborn data. Upon learning this, Brindon expressed some strong reservations to Patty about analyzing the data.

Required:

1. Assume that Bill did acquire the data from Jackie Wilson. Comment on Jackie's behav¬

ior. Which standards of ethical conduct did she violate (see Chapter 1)?

2. Were Brindon's instincts correct—should he have felt some reser\'ations about analyzing the data? Would it be ethical to analyze the data? Do any of the IMA standards of ethical conduct apply (see Chapter 1)? What would you do if you were Brindon? Explain.