Data analysis and ethics. Comdex Electronics makes videocassette recorders (VCRs), bales of VCRs have been very steady over the past ten years. Helen Gibbs, the manager of the department that makes the head mechanism for the VCR, is keen on introducing robots into the department to improve VCR quality. To obtain funding, Gibbs knows that she will need to justify the investment in terms of labour cost savings. Gibbs estimates average annual labour costs in the department of $1,449,000 over the past ten years. Labour costs over the past three years have averaged $960,000. If robots are introduced,

labour costs would decrease to $660,000 per year. Average savings in labour costs of at least $480,000 per year are needed to justify the investment in robots. Gibbs uses the $1,440,000 number in her analysis. $he then asksJoan Mistry, the management accountant, to review her calculations before she submits the robot proposal to senior management.
Mistry has a problem with Gibbs’s analysis. $he feels that by using a long time period of ten years, Gibbs was able to show larger labour cost savings than was justified. Mistry knew that Gibbs would be unhappy with these findings.
Mistry also felt that the robot investment was good for the company. $he tried to redo the analysis in a way that might show larger cost savings, even though she knew that the assump¬
tions she was using were not appropriate. Nothing she tried could change the conclusion that the cost savings were not large enough to justify the investment in robots. Gibbs is upset when she sees Mistry’s report. $he tells Mistry, “Try something else. I am sure you can come up with a set of assumptions under which this investment can be justified. You and I both know this is a good investment for the company to make. Quality is essential ifwe are to compete.”
Required 1. Calculate the labour cost savings ifGibbs uses average labour costs incurred

(a) over the past ten years and

(b) over the past three years. Does it make a difference in terms of justifying the robot investment?
2. Why do you think the average labour costs over the past ten years differ significantly from the average labour costs over the past three years?
3. Explain whetherJoan Mistry’s initial attempts to redo the data analysis to justify the robot investment were ethical.
4. Identify the steps thatJoan Mistry should follow in attempting to resolve this situation.
418 CHAPTER 10 COLLABORATIVE LEARNING PROBLEM