=+20-36 K Ethics, levers of control (R. Madison, adapted, Strategic Finance, January 2000) OBJECTIVE 9 United Forest
Question:
=+20-36 K Ethics, levers of control (R. Madison, adapted, Strategic Finance, January 2000) OBJECTIVE 9 United Forest Products (UFP) is a large timber and wood processing plant. UFP’s performance evaluation system pays its managers substantial bonuses if the company achieves annual budgeted profit numbers. In the last quarter of 2014, Amy Kimbell, UFP’s management accountant, noted a slight increase in output and a significant decrease in the purchase cost of raw timber.
One day when Amy Kimbell was at the log yard where timber is received and scaled (weighed and checked for quality) to determine what UFP pays for it, she noted that a timber contractor was quite aggravated when he was given the scale report (board metres and quality). When she asked one of the scale employees what was bothering the contractor, he revealed that the scalers had received instructions from their supervisors deliberately to underestimate evaluations of timber quantity and quality. This reduced the price paid to timber suppliers, which also reduced direct materials costs, helping UFP to meet its profit target.
Step by Step Answer:
Cost Accounting A Managerial Emphasis
ISBN: 9781442563377
2nd Edition
Authors: Monte Wynder, Madhav V. Rajan, Srikant M. Datar, Charles T. Horngren, William Maguire, Rebecca Tan