ABC Printing provides printing services to many different corporate clients. ABC bids on print jobs, however, the new ones, are negotiated on a cost-plus basis. Cost-plus means that the buyer is willing to pay the actual cost plus a return (profit) on product costs to ABC.

(Cost-plus means if the total Job cost were $5.00 at 30% cost-plus, the selling price would be $6.50 with $1.50 as profits to ABC

Alissa Shah, the controller for ABC, has recently returned from a meeting where ABC'S president stated that he wanted her to find a way to charge most of the company's costs to projects that are on a cost-plus basis. The president noted that the company needed more profits to meet its stated goals this period. By charging more costs to the cost-plus projects and therefore fewer costs to the recurring set price jobs, the company should be able to increase its profits for the current year.

Alissa knew why the president wanted to take this action. Rumours were that he was looking for a new job with another company and, if the company reported strong profits, the president's opportunities would be better for his new position. Alissa also recognized that she could probably increase the cost of certain jobs by changing the activity basis used to allocate the manufacturing overhead. The current cost base used to allocate manufacturing overhead was using direct labour hours.

ABC current revenue streams are made up of 75% new bids and 25% recurring contract jobs with set pricing. This is based on 500 jobs completed in the year.

1. Discuss the ethical implications. If you were Alissa what would you do?