Customer profitability, responsibility for environmental cleanup, ethics. Industrial Fluids, Inc. (IF) manufactures and sells fluids used by metal-cutting plants. These fluids enable metal-cutting to be done more accurately and more safely.

IF has more than 1,000 customers. It is currently undertaking a customer profitability analysis. Ariana Papandopolis, a newly hired MBA, is put in charge of the project. One issue in this analysis is IF’s liability for its customers’ fluid disposal.

Papandopolis discovers that IF may have a responsibility under Canadian environmen¬

tal legislation for the disposal of toxic waste by its customers. Moreover, she visits ten customer sites and finds dramatic differences in their toxic-waste-handling procedures. She describes one site owned by Acme Metal as an “environmental nightmare about to become a reality.” She tells the IF controller that even if they have only one-half of the responsibility for the cleanup at Acme’s site, they will still be facing very high damages. He is displeased at the news. Acme Metal has not paid its account to IF for the past three months and has formally announced bankruptcy. He cautions Papandopolis to be careful in her written report. He notes that “IF does not want any smoking guns in its files in the case ofsubsequent litigation.”

Required 1. As Papandopolis prepares IF’s customer profitability analysis, how should she handle any estimates oflitigation and cleanup costs that IF may be held responsible for?

2. How should Papandopolis handle the Acme Metal situation when she prepares a prof¬

itability report for that customer?

COLLABORATIVE LEARNING PROBLEM