Grace Luft is assistant controller at Allpax Packaging, Inc., a manufacturer of cardboard boxes and other packaging
Question:
Grace Luft is assistant controller at Allpax Packaging, Inc., a manufacturer of cardboard boxes and other packaging materials. Luft has just returned from a packaging industry conference on activity-based costing. She realizes that ABC may help Allpax meet its goal of reducing costs by 5% over each of the next three years. Allpax Packaging's Order Department is a likely candidate for ABC. While orders are entered into a computer that updates the accounting records, clerks manually check customers' credit history and hand-deliver orders to shipping. This process occurs whether the sales order is for a dozen specialty boxes worth $60. or 10,000 basic boxes worth $8,500. Luft believes that identifying the cost of processing a sales order would justify (1) further computerization of the order process, and (2) changing the way the company processes small orders. However, the significant cost savings would arise from elimination of two positions in the Order Department. The company's sales order clerks have been with the company many years. Luft is uncomfortable with the prospect of proposing a change that will likely result in terminating these employees. Required Use the IMA's ethical standards (Exhibit 19-15) to consider Luft's responsibility when cost savings come at the expense of employees' jobs.
Step by Step Answer:
Accounting
ISBN: 9780130906991
5th Edition
Authors: Charles T. Horngren, Walter T. Harrison, Linda S. Bamber, Betsy Willis, Becky Jones