Don Homer, cost accounting manager for Tibbings, Inc., was having dinner with Spencer Gee, a friend since college days. The two had attended the same university and belonged to the same fraternity. Upon graduation, they had taken positions with two competitors whose headquarters were located in the same city. Two years ago, the top management of Tibbings had implemented a life cycle cost management program. Since then, Don had worked closely with design engineering, providing information about activities and their costs. He, in turn, became very well informed about the new product development projects.

Spencer was also an accountant and had recently been promoted to assistant controller.

Eventually, the conversation turned to work topics.

SPENCER: How are things going at work?

DON: Very well. Our new life cycle cost management approach has made a real difference in our profitability. The latest two products have each earned significantly more than in the past.

SPENCER: Interesting. How many new products are coming out this year?

DON: We have three new ones coming out—two of which should provide some signifi¬

cant challenges for your company.

SPENCER: The last two certainly did. Our competing products earned 30% less profit—

all because of yours. I don't know how you did it, but the customers seemed to like yours better.

DON: We gathered information on the cost of maintaining and using the products and then made a real effort to design the new products so that they reduced these costs. We also looked at design so that production costs were lowered. This way, we could sell the prod¬

ucts for less and still make the same per-unit profit. It worked. Our total profits went up by about $40,000 on each product.

SPENCER: What about these three new ones? Are they coming out soon? And are you planning on selling them for less than you usually do as well?

DON: As I understand it, they should all be on the market within two weeks. And yes, we will sell for less than normal. They cost less. Linking design to downstream activities has been a real benefit.

SPENCER: Well, maybe we need to do something similar. Our competing products will probably come out later than yours as well. That's not good for us. Oh well. Let's talk about something more pleasant. We get enough of work during the week.

Required:

Given the guidelines for ethical conduct listed in Chapter 1, evaluate the ethical conduct of Don and Spencer.