Hannah Gilpin is the controller of Blakemore Auto Glass, a division of Eastern Glass and Window. Her division has been under pressure to improve its divisional operating income. Currently, divisions of Eastern Glass are allocated corporate overhead based on the cost of goods sold. Jake Myers, the president of the division, has asked Gilpin to reclassify \($65,000\) of packaging materials, which is included in the cost of goods sold, as production cost, which is not. Doing so will save the division \($30,000\) in allocated corporate overhead. The packing materials in question are needed to carry the finished goods to retail outlets. Gilpin does not see a reason for the reclassification of costs, other than to avoid overhead allocation costs.

1.) Describe Gilpin’s ethical dilemma.

2.) What should Gilpin do if Myers gives her a direct order to reclassify the costs?